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AFRICAN DEVELOPMENT BANK GROUP
CENTRAL AFRICAN REPUBLIC
ECONOMIC AND FINANCIAL REFORM SUPPORT PROGRAMME
RDGC/ECGF/PGCL DEPARTMENTS
March 2017
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TABLE OF CONTENTS
ACRONYMS AND ABBREVIATIONS ................................................................................................ i PROGRAMME INFORMATION .......................................................................................................... ii
LOAN/GRANT INFORMATION ......................................................................................................... ii I. PROPOSAL .................................................................................................................................... 1 II. COUNTRY AND PROGRAMME CONTEXT ................................................................................ 1 2.1. Political Situation and Governance Context ................................................................................. 1 2.2. Recent Economic Developments, Macroeconomic and Budget Analysis ...................................... 2
2.3. Competitveness of the Economy .................................................................................................... 4 2.4. Public Finance Management ......................................................................................................... 5 2.5. Inclusive Growth, Poverty Situation and Social Context .............................................................. 6
III. GOVERNMENT’S DEVELOPMENT PROGRAMME ................................................................. 7 3.1. Government’s Overall Development Strategy and Short-Term Priorities .................................... 7 3.2. Constraint to Implementing the National Development Programme ........................................... 7 3.3. Consultation and Participation Process ........................................................................................ 8
IV. BANK SUPPORT FOR THE GOVERNMENT STRATEGY .......................................................... 8 4.1. Linkage with the Bank Strategy ..................................................................................................... 8 4.2. Compliance with Eligibility Criteria ............................................................................................. 9 4.3. Collaboration and Coordination with Other Partners .................................................................. 9
4.4. Linkage with Other Bank Operations ......................................................................................... 10 4.5. Analytical Works Underpinning the Programme ........................................................................ 11 V. THE PROPOSED PROGRAMME . ............................................................................................. 11
5.1. Programme Goal and Objective .................................................................................................. 11
5.2. Components, Objectives and Expected Results ........................................................................... 11 5.3. Policy Dialogue ........................................................................................................................... 16 5.4. ADF Grant and TSF Grant Conditions ....................................................................................... 16
5.5. Application of Good Practice Principles on Conditionality ........................................................ 18 5.6. Financing Needs and Arrangements ........................................................................................... 18
5.7. Application of Bank Policy on Non-Concessional Debt Accumulation ....................................... 19 VI. PROGRAMME IMPLEMENTATION. ......................................................................................... 20 6.1. Programme Beneficiaries ............................................................................................................ 20
6.2. Social and Gender Impact ........................................................................................................... 20 6.3. Impact on Climate Change .......................................................................................................... 20
6.4. Implementation, Monitoring and Evaluation .............................................................................. 20 6.5. Financial Management and Disbursement .................................................................................. 20
VII. LEGAL INSTRUMENTS AND AUTHORITY .............................................................................. 22 7.1. Legal Instruments ....................................................................................................................... 22 7.2. Conditions Associated with Bank Intervention ........................................................................... 22 7.3. Compliance with Bank Group Policies ........................................................................................ 23 VIII. RISK MANAGEMENT ................................................................................................................. 23
IX. RECOMMENDATION ................................................................................................................. 23
Tables
Table 1 - Key Macroeconomic Indicators ........................................................................................ 4
Table 2 - Preliminary Measures and Triggers ................................................................................. 17 Table 3 - Projected Financing Needs and Sources (in CFAF billion) ............................................. 19
Table 4 - Risks and Mitigation Measures ........................................................................................ 23
List of Figures and Boxes
Figure 1 - CAR – Bank Portfolio as at 31/10/2016 .................................................................. 10
Annexes
ANNEX 1 – Letter of Development Policy ANNEX 2 – Conditions for Use of General Budget Support ANNEX 3 – Matrix of Programme Measures
ANNEX 4 – Relations between CAR and IMF ANNEX 5 – Key Macroeconomic Indicators ANNEX 6 – Donor Interventions in CAR ANNEX 7 – Fiduciary Framework-Related Measures during the Exceptional Crisis Period .....
ANNEX 8 – Bank Portfolio in CAR as at 31 October 2016 ANNEX 9 – Administrative Map of CAR
i
CURRENCY EQUIVALENTS
As at 30 September 2016
Currency Unit CFA F (XAF)
1 Unit of Account = XAF 821.6189
1 Unit of Account = EUR 1.2525
1 Unit of Account = USD 1.3943
FISCAL YEAR
(1 January – 31 December)
ACRONYMS AND ABBREVIATIONS
ACCT Central Treasury Accounting Agency
ADF African Development Fund
AfDB African Development Bank
BEAC Bank of Central African States
CAR Central African Republic
CCIMA Chamber of Commerce, Industry and Crafts
CFAF Central African Financial Cooperation Franc
CMCAA Joint Business Improvement Consultation Framework
CNLC National Anti-Corruption Committee
CRBS Crisis Response Budget Support
CSP Country Strategy Paper
CS-REF Economic and Financial Reform Monitoring Unit
DDRR Disarmament, Demobilization, Reintegration and Repatriation
DGB General Directorate of Budget
DGDDI General Directorate of Customs and Indirect Taxes
DGID General Directorate of Taxes and Property
DGTCP General Directorate of Treasury and Public Accounting
ECCAS Economic Community of Central African States
EITI Extractive Industries Transparency Initiative
EU European Union
FSF Fragile States Facility
GBSF General Budget Support Framework
GDP Gross Domestic Product
GESCO Public Finance Management Support Information System
IMF International Monetary Fund
MDG Millennium Development Goals
MFB Ministry of Finance and Budget
MINUSCA United Nations Integrated Multidimensional Mission in CAR
MoU Memorandum of Understanding
NGO Non-Governmental Organisation
PARCGEF Economic and Financial Management Capacity Building Support Project
PEFA Public Expenditure and Financial Accountability
PFM Public Finance Management
PBO Programme-Based Operations
PUASCRE Emergency Crisis Exit and Economic Recovery Support Programme
PURD Emergency Programme for Sustainable Recovery in CAR
RCF Rapid Credit Facility
ii
RCPCA National Strategy for the Recovery and Peacebuilding in the Central African
Republic (RCPCA)
TFP Technical and Financial Partners
TSF Transition Support Facility
TSFO Table of State Financial Operations
UA Unit of Account
UNDP United Nations Development Programme
USD United States Dollar
WB World Bank
PROGRAMME INFORMATION
INSTRUMENT: General budget support (GBS)
PBO DESIGN MODEL: Programme-based budget support
LOAN/GRANT INFORMATION
Client Information
DONEE: Government of the Central African Republic
EXECUTING AGENCY: Ministry of Finance and Budget
Financing Plan
2016 2017 (*)
Instrument Loan Grant Loan Grant
ADF 2.70 5.00
TSF - Pillar I 8,02 5.00
TSF (Cancellation/restructuring) 1.56
Total 10.72 1.56 10.00
Total Cost 12.28 10.00
(*) Indicative amount
Key Information on TSF and ADF Financing
ADF / TSF
Loan/Grant Currency EUR
Type of interest Fixed
Interest margin * 0%
Service commission 0.75% per year on the amount of the unpaid disbursed loan
Commitment fee 0.5% on the amount of the undisbursed loan 120 days after the
signing of the Loan Agreement
Other expenses Not applicable
Maturity 40 years
Grace period 10 year
Deadlines Biannual
iii
Key Information on TSF Grant Financing
Grant Currency
(EUR)
Interest Type* (Not applicable)
Interest Rate Margin* (Not applicable)
Commitment Charge* (Not applicable)
Other Charges* (Not applicable)
Repayment Period (Not applicable)
Grace Period (Not applicable)
*if need be
Implementation Schedule – Key Milestones (projected)
Concept Note Approval
(21 September 2016)
Programme Approval (10 March 2017)
Effectiveness (15 March 2017)
Completion (31 December 2017)
Last Disbursement (31 December 2017)
iv
Programme Executive Summary
General
programme
overview
Programme name/number: Economic and Financial Reform Support Programme
(PAREF)/SAP Id. P-CF-K00-006.
Geographic scope: Nationwide
General schedule: 15 months (1 October 2016 - 31 December 2017)
Financing: TSF grant UA 1.56 million; TSF loan UA 8.02 million; ADF loan UA 2.70
million
Operational instrument: General Budget Support (GBS)
Sector: Economic governance
Programme
outcomes and
direct
beneficiaries
PAREF comes in a context of normalization of the country’s institutions, with the
adoption of a new constitution in December 2015 and the election of a new president in
February 2016. The Programme is part of continuing measures supported by the two
Crisis Response Budget Support (CRBS) operations, which assisted the transitional
government in restoring the capacities of the financial and social administration. PAREF
will include more structuring measures to help boost the economy and improve public
finance management. The implementation of programme measures are expected to result
in (i) an increase in tax revenue from 7.1% of GDP in 2015 to 8.7% of GDP in 2017; (ii)
a reduction in public procurement by direct negotiation from 90% in 2015 to less than
50% in 2017; (iii) a reduction in the number of business start-up days, from 22 days on
average in 2015 to less than 14 days on average in 2017; and (iv) a decrease in the cost of
creating businesses from 204% of income per capita in 2015 to less than 150% of income
per capita.
The Programme’s direct beneficiaries are the public administration and structures in
charge of Programme-supported reforms. The final beneficiaries are the Central African
people.
Alignment on
Bank priorities
PAREF is aligned with the Bank’s Interim Assistance Paper covering the period 2014-
2016, Pillar 2 of which concerns restoration of institutional capacities and promotion of
good governance. The programme also ties in with the Bank’s High 5 priorities, by
contributing to improving the living conditions of the population. It is also consistent with
the guidelines of the 2014 – 2018 Governance Action Plan (GAP II), and the Bank
Strategy to address fragility and strengthen resilience in its Regional Member Countries
during the period 2014-2019. Indeed, the Programme supports governance in economic
sectors, State building, capacity building in economic management, provision of basic
social services and support to the private sector.
Furthermore, the Programme remains aligned with the pillars of the new National
Recovery and Peacebuilding in the Central African Republic (RCPCA) Strategy being
prepared by government.
Needs assessment
and rationale
Most of the country’s challenges, identified under the Bank’s two previous support
operations, are still relevant. Indeed, the return to constitutional order has not yet resulted
in a total normalization of the situation. The country remains fragile, with persistent
intercommunity tensions leading at times to violence with loss of human life. It should be
noted that CAR’s fragility is not only connected to the 2013 crisis, but also the result of
deterioration of the economic, social, security and governance situation in the country.
There are still more than 420,000 displaced persons and about 467,000 Central African
refugees in neighbouring countries. The restoration of security and national reconciliation
are major challenges for government. The reestablishment of health and education
systems is also a major challenge, despite the efforts made in the last two years to redeploy
health personnel and teachers. On the economic front, the recovery is gradual but still
insufficient to create jobs and generate the necessary resources for the financing of
primary expenditure.
In light of the foregoing, the country’s Technical and Financial Partners (TFP) agreed to
continue their budget support, in the three coming years, with a view to consolidating the
transition’s achievements and sustainably stabilizing social peace. AfDB support ties in
with this joint effort.
v
Harmonisation Before the March 2013 crisis, a General Budget Support Framework (GBSF) defined the
framework for TFP intervention in CAR. This framework has not yet been updated;
however, TFPs, engaged since 2014 in budget support operations, consult regularly to
conduct joint missions in CAR, under the leadership of the IMF. The current operation
was prepared during a joint mission in CAR in May 2016 with the IMF, World Bank, EU
and France. During appraisal, exchanges continued with TFPs and all State and private
sector structures involved in economic and financial reforms.
PAREF-supported measures were subject to in-depth discussions with all stakeholders.
The appraisal mission’s aide-mémoire was shared for proper harmonisation of
interventions.
Bank’s value-
added
The Bank’s comparative advantages stem from its experience in implementing the two
previous CRBS operations and the successful articulation of Programme measures with
the Economic and Financial Management Capacity Building Support Project
(PARCGEF). Through these operations, the Bank has been participating actively in
dialogue for the last three years and assists government technically in public finance
management and capacity building for private sector support structures.
Contributions to
gender equality
and women’s
empowerment
Gender equality in CAR is established by the new constitution adopted in December 2015.
In his general policy declaration, the Prime Minister announced that legal systems would
be strengthened to protect women’s rights. To this end, government intends to
operationalise the Joint Rapid Intervention Unit against Sexual and Gender-Based
Violence and a Comprehensive Care Centre for Victims of Violence.
PAREF will contribute to improving women’s living conditions through the revival of the
agricultural sector, which employs mostly women and budgetary allocations for
implementation of the strategy to assist women victims of violence.
Policy dialogue
and associated
technical
assistance
Dialogue under the programme will concern reforms and measures that will have
structuring effects on the country’s medium-term economic and financial situation. These,
particularly, are issues relating to control of exemptions and the updating of the taxpayers’
file; the improvement of budget execution, especially in social sectors; the establishment
of a new integrated public finance management system; the strengthening of dialogue
between public authorities and the private sector; and governance in the cotton, mining
and forestry sectors. The Bank will continue its technical support through PARCGEF,
and dialogue on these issues will be conducted jointly with other TFPs.
vi
RESULTS-BASED LOGICAL FRAMEWORK Country and Programme Title: CAR – Economic and Financial Reform Support Programme
Programme Goal: Contribute to the improvement of public finance management and the revival of economic growth
Results Chain Indicators Means of
Verification
Risks/
Mitigation measures Indicator Baseline Situation Target
Imp
act
Contribute to consolidating
economic growth and improving
the social and humanitarian
situation
Real GDP growth rate
Human development
index
4.5% in 2015
0.35 in 2014
5.2% in 2016
5.0% in 2017
0.40 in 2017
IMF report
UNDP World
Development Report
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Outcome 1:
Improvement of tax revenue
Tax rate 7.1% of GDP in 2015 8,1% in 2016
8,7% in 2017
TSFO (IMF)
Procurement audit
report (ARMP)
Doing Business
Report (WB)
Political and security risk
related to fragility of
public institutions and the
prevailing climate of
insecurity in certain areas
in Bangui and the
country’s provinces.
This risk is mitigated by
the return to constitutional
order and gradual DDRR
implementation
Macroeconomic risk:
High economic contraction
and dependence on
external assistance
Mitigation measures:
Recovery of activities and
exports in the mining
sector, commitment of
TFPs for budget assistance
during the three coming
years.
Fiduciary risks: High
imbalances on the budget
circuit and control systems
Mitigation measures:
Reform programmes
supported by the IMF and
other TFPs include
measures to improve
public finance
management and
transparency.
Outcome 2:
Improvement of procurement
transparency
Percentage of public
procurement by direct
negotiation
[90]% in 2015
[70]% in 2016
[50]% in 2017
Outcome 3:
Improvement of the business
environment
Average number of days
for business creation
Cost of business creation
(in % of income per capita)
22 days in 2015
204% in 2015
< 14 days in 2017
< 150% in 2017
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COMPONENT I: Improvement of tax revenue mobilisation and public expenditure management
Sub-component 1-1 Improvement of tax revenue
1.1.1 Preparation of an interim
report as at 30 August 2016 on the
situation of exemptions granted by
the Inter-ministerial Committee in
charge of Tax and Customs
Exemptions (prerequisite)
1.1.2 Revision of the legal,
regulatory and institutional
framework for granting and
managing exemptions (trigger)
1.1.3 Census of taxpayers and
updating of the taxpayers’
database in the new taxation
management system
(SYSTEMIF4)
1.1.4 Revision of exemption
agreements that will expire in
2016
1.1.1 Report on the
situation of exemptions
1.1.2 Instrument on the
revision of the legal,
regulatory and
institutional framework
for granting and managing
exemptions
1.1.3 Updated taxpayers’
database in SYSTEMIF4
1.1.4 Number of revised
agreements
1.1.1 Preliminary
report available
1.2.2 Framework not
yet revised
1.1.3 Census under
way and
SYSTEMIF4 being
installed
1.1.4 Agreements
not yet revised
1.1.1 Report available
before the end of
October 2016
1.1.2 Revision of
framework before June
2017
1.1.3 Census made and
taxpayers’ database
updated before June
2017
1.1.4 Revision of all
agreements concerned
before June 2017
CICEFD report
Copy of instrument
DGID report
CICEFD report
Sub-component 1.2 Improvement of budget execution
1.2.1 Validation of the expenditure
execution procedures manual –
trigger- and drafting of the budget
preparation guide – prerequisite
1.2.2 Adoption of instruments
relating to the designation of credit
managers and administrators for
better definition of the terms of
their appointment and their duties
– trigger
1.2.3 Preparation of specifications
for migration to a new integrated
public finance management
system.
1.2.4 Increase in the budget
execution rate (excluding salaries)
of the education, health and social
affairs sectors
1.2.5 Audit of public contracts
1.2.6 Operationalisation of the
Conflict Resolution Committee at
the Public Contracts Regulatory
Agency (ARMP)
1.2.1 Expenditure
execution procedures
manual and drafting of a
budget preparation guide
1.2.2 New instruments
adopted
1.2.3 Report on the
specifications
1.2.4 Budget commitment
rate (excluding salaries) of
the education, health and
social affairs sectors
1.2.5 Number of years of
audit carried out between
2012-2015
1.2.6 Officials appointed
1.2.1 Manual and
guide being finalized
1.2.2 Instruments not
yet adopted
1.2.3 Audit of the
existing system
(GESCO) carried out
and development of
current
specifications
1.2.4 Commitment
rate estimated at 10%
in 2014
1.2.5 No audit
carried out for the
years 2012 - 2015
1.2.6 Members of the
Conflict Resolution
Committee are not
yet appointed
1.2.1 Manual and guide
prepared before
September 2016
1.2.2 Instrument
adopted before June
2017
1.2.3 Specifications
prepared in 2017
1.2.4 Reach at least a
50% commitment rate
in 2017
1.2.5 Audits carried out
in 2017 for the years
2012-2015
1.2.6 Appointment of
members of the
Conflict Resolution
Committee in 2017
Copy of the manual
and guide
Copy of the
instrument
Copy of the validated
specifications
Budget execution
report prepared by the
General Directorate
of Budget
Copy of the 2017
Finance Law
Copy of audit reports
forwarded by ARMP
Instruments on the
appointment of
members of the
Conflict Resolution
Committee
COMPONENT II : Improvement of the business environment and governance in the productive sectors
Sub-component 2.1 Improvement of the business environment and support to SMEs
vii
Country and Programme Title: CAR – Economic and Financial Reform Support Programme
Programme Goal: Contribute to the improvement of public finance management and the revival of economic growth
Results Chain Indicators Means of
Verification
Risks/
Mitigation measures Indicator Baseline Situation Target
2.1.1 Assessment of losses and
damage suffered by enterprises
during the 2013 events
(prerequisite)
2.1.2 Adoption of a clearance plan
for domestic arrears of the period
2012-2014 (trigger)
2.1.3 Operationalisation of the
Single Window for Business
Registration (GUFE)
2.1.4 Establishment of a National
Private Sector Guarantee and
Support Fund
2.1.5 Operationalisation of an
approved Management Centre
within the Chamber of Commerce,
Industry, Mines and Crafts
(CCIMA)
2.1.1 Reports validated
2.1.2 Clearance plan for
domestic arrears of the
period 2012-2014
2.1.3 GUFE procedures
manual
2.1.4 Study on the
National Private Sector
Guarantee and Support
Fund
2.1.5 Study on the
establishment of a
Management Centre
within the Chamber of
Commerce, Industry,
Mines and Crafts
(CCIMA)
2.1.1 Assessment of
losses being carried
out
2.1.2 Audit of
domestic arrears of
the period 2012-
2014 being finalized
2.1.3 GUFE lacks a
procedures manual
and a financial and
accounting
management system
2.1.4 Study on the
National Private
Sector Guarantee
and Support Fund
being conducted
2.1.5 Study for the
establishment of an
approved
Management Centre
being conducted
2.1.1 Report on the
assessment of losses
validated in 2016 and
adoption of measures
in 2017
2.1.2 Arrears clearance
plan adopted before
June 2017
2.1.3 GUFE’s
procedures manual and
financial and
accounting
management system
established before June
2017
2.1.4 Study finalized in
2016 and organisation
of a roundtable for
capitalization of the
Fund before the end of
2017
2.1.5 Study finalized in
2016 and an approved
management centre
operational in Bangui
in 2017
Copy of the report
forwarded by the
Ministry of Finance
Copy of the arrears
clearance plan
approved by
government
Copy of the
procedures manual
Copy of study and
report on the
organisation of the
roundtable
Copy of study and
CCIMA report
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Sub-component 2-2 Revival of productive sectors
2.2.1 Updating of the National
Agricultural Investment, Food
Security and Nutritional
Programme (PNIASAN) -
prerequisite
2.2.2 Adoption of a decree on the
enabling instruments of the
Environmental Code (trigger)
2.2.3 Revival of cotton and food
crop production by clearing State
arrears to business operators
2.2.4 Conduct of a study on
forestry taxation and para-taxation
in order to make the timber
exploitation sector competitive
2.2.5 Revival of mining
production by continuing the
implementation of measures for
total compliance of diamond
producing areas with the
Kimberley Process
2.2.6 Revision of the Mining Code
to improve the sector’s
attractiveness and industrialization
2.2.1 Plan updated
2.2.2 Decree on the
enabling instruments of
the Environmental Code
2.2.3 Arrears clearance
rate
2.2.4 Study report
2.2.5 Number of areas
declared compliant
2.2.6 Revised Mining
Code
2.2.1 PNIASAN
being updated –
preliminary report
available
2.2.2 Enabling
instruments of the
Environment Code
not yet adopted
2.2.3 State arrears to
the sector not yet
cleared in 2015
2.2.4 Study being
conducted
2.2.5 Four diamond
producing areas
declared compliant
in September 2016
2.2.6 Mining Code
being revised
2.2.1 PNIASAN
updated before 30
October
2.2.2 Decree on the
enabling instruments of
the Environmental
Code Text
adopted in 2017
2.2.3 The sector’s
arrears cleared in 2017
2.2.4 Study on forestry
taxation finalized in
2016 and a new tax
system adopted in 2017
2.2.5 Achieve at least
ten diamond producing
areas declared
compliant in 2017
2.2.6 New Mining
Code adopted in 2017
Copy of PNIASAN
Copy of instrument
Report on the arrears
situation
Copy of the study and
instrument on the tax
system
Report of the
Ministry in charge of
energy on the
Kimberley Process
Copy of the Mining
Code
Acti
vit
ies
Total resources: UA 12.28 million
ADF grant – PBS: UA 2.7 million
TSF grant - Pillars: UA 8.02 million
TSF Grant (Restructuring/Cancellation: UA 1.56
million
-
1
REPORT AND RECOMMENDATION OF MANAGEMENT TO THE BOARDS OF DIRECTORS ON PROPOSED ADF AND TSF GRANTS TO THE CENTRAL AFRICAN REPUBLIC FOR THE EMERGENCY ECONOMIC AND FINANCIAL REFORM SUPPORT PROGRAMME (PAREF)
I. PROPOSAL
1.1. This proposal, submitted to the Board for approval, concerns a UA 1.56 ADF grant
million, a UA 8.02 million TSF grant and a UA 2.70 million ADF loan to finance the first year
of the Economic and Financial Reform Support Programme (PAREF).
1.2. PAREF’s objectives are in line with the Emergency Crisis Exit and Economic
Recovery Support Programme (PUASCRE), financed by the Bank in 2014 and 2015 through
two Crisis Response Budget Support (CRBS) operations. PUASCRE1 had been the Bank’s rapid
response to help the country emerge quickly from the military and political crisis triggered in March
2013, when the ruling government was overthrown by Séléka rebels. PUASCRE was instrumental
in restoring the normal functioning of public institutions and basic social services, whose capacities
had been severely affected by the crisis. PUASCRE also contributed to the revival of private sector
activities, by helping clear part of the State’s arrears to national suppliers. Now that constitutional
order has been restored, the Bank, through PAREF, seeks to help government implement structuring
reforms to sustainably improve governance in public finance management, the private sector
environment, and promote the revival of productive sectors.
1.3 PAREF will take the form of a programme-based support operation (PBO) covering
the 2016 and 2017 fiscal years. It will be financed by two general budget support (GBS) operations,
namely an amount of UA 12.28 million in 2016 and an indicative amount of UA 10 million in 2017.
In accordance with the Bank’s policy for PBOs, disbursements will be made in single tranches,
depending on the implementation of a set of preliminary measures in 2016 and indicative triggers
for the second phase in 2017. Programme-based support will help provide predictable financing to
the Government of the Central African Republic (CAR), while facilitating dialogue on medium-term
economic and financial reforms, thanks to the flexibility inherent in the programme-based approach.
II. COUNTRY AND PROGRAMME CONTEXT
2.1 Political Situation and Governance Context
2.1.1 The recent political context in CAR is marked by a return to constitutional order
following the organisation of the December 2015 constitutional referendum as well as
presidential and legislative elections in February and March 2016. The country’s security
situation, which had already improved significantly in 2015, thanks to the support of the United
Nations Integrated Multidimensional Mission in CAR (MINUSCA) and the French SANGARI
forces, continued to be consolidated in 2016 with the deployment of the Central African Armed
Forces (FACA). Prefectural authorities were partially deployed in the regions to gradually ensure
the effective presence of the State. However, the country remains in a fragile situation, with pockets
of insecurity after three years of a military-political crisis marked by intercommunity violence. Last
June, clashes between vigilantes and police forces in Bangui led to the death of some ten persons.
The disengagement of the French force initiated since the organisation of general elections reveals
1 See Technical Annex 1 for details on PUASCRE-2’s state of implementation
2
risks of renewed violence in the country. One of the major priorities of the new government is the
implementation of the Disarmament, Demobilization, Reintegration and Repatriation (DDRR)
process whose success depends on the sustainable integration of ex-combatants into economic
activities and the opening up of several regions of the country.
2.1.2 As a reminder, CAR had been plunged into one of the most severe crises of its history
in March 2013, when an armed rebellion from the country’s North overthrew the government
that had been ruling for a decade. Thanks to international mediation and the support of the
country’s technical and financial partners (TFP), a political transition was established and was able
to restore the country’s constitutional institutions at the beginning of 2016. However, the crisis
severely affected the country’s social climate and humanitarian situation and its production
capacities in all economic sectors. The main challenges faced by the country in relation to factors of
fragility are: (i) the restoration of security countrywide; (ii) social cohesion and the effective
presence of the State on the entire national territory; and (iii) economic recovery through support to
the private sector and the revival of productive sectors.
2.1.3 In terms of governance, CAR still remains at the bottom of the rankings in Africa and
the world although some slight progress has been made in the last two years. Transparency
International’s Corruption Perception Index (CPI) ranks the country in the 145th position among 168
countries, with a 24/100 rating. The 2016 edition of the Mo Ibrahim Index for Governance in Africa,
shows a slight improvement in the country’s rating in 2015, but it is still ranked 52nd out of 54
countries. In 2008, government created a National Anti-Corruption Committee (CNLC) and
formulated an anti-corruption strategy in 2012. But the 2013 crisis did not allow for its effective
implementation. The new constitution provides for the establishment of a Higher Authority for Good
Governance. In terms of transparency in natural resource management, CAR had joined the
Extractive Industries Transparency Initiative (EITI) in May 2007 and was declared a compliant
country in March 2011. However, owing to political instability, the country was temporarily
suspended from the Initiative on 10 April 2013. In May 2013, it was also suspended from the
Diamond Certification System under the Kimberley Process. Government has since then taken
measures to secure and improve governance in production areas. These measures helped in partially
lifting the embargo on 26 June 2015, especially in four production areas considered compliant with
the Kimberley transparency standards. In the very short term, government also intends to relaunch
the activities of the National Council for the Extractive Industries Transparency Initiative (EITI-
CAR). In the area of public finance management (PFM), the country has made some progress thanks
to the dialogue that was maintained with its key TFPs during the crisis. Although a new Public
Expenditure and Financial Accountability (PEFA) review has not been conducted to assess this
progress, there is a strong commitment by authorities to return to orthodoxy in PFM.
2.2 Recent Economic Developments, Macroeconomic and Budget Analysis
2.2.1 The country’s economic situation, severely affected by the crisis with a GDP
contraction of about 37% in 2013, shows signs of gradual recovery. The real GDP growth rate
rose to 4.8% in 2015 against 1% in 2014 and inflation dropped significantly from 11.6% in 2014 to
4.5% in 2015. Taking advantage of the gradual return of security in Bangui and the country’s main
supply corridors for commodities and other capital goods, there is a revival of activities in trade, the
timber sector and manufacturing.
3
2.2.2 The rural and forestry sectors, which to date represent the main sources of wealth,
employment and foreign exchange, are resuming gradually after a strong contraction in
activities. The agricultural sector accounts for 45 % of GDP, 70% of active employment and more
than 75% of national food consumption. The country has immense natural resources and agro-
ecological conditions favourable for agriculture and livestock breeding, with 15 million hectares (ha)
of arable land of which only about 800 thousand ha are cultivated each year. The crisis seriously
disrupted farms, resulting in losses of means of production and destruction of crops, fields and small
livestock. Thus, agricultural production fell by 46% in 2013 and then grew by 11% in 2014. With
respect particularly to cotton, the country’s main export crop before the crisis, the sector is affected
by destruction of production tools, State arrears to subsector actors and poor governance. In the
forestry sector, logging companies had also reduced or suspended their activities, due to insecurity.
Today, thanks to the gradual improvement of security, activities are resuming gradually.
Government has prepared an action plan for cotton revival and targets a production of about 50,000
tonnes of seed cotton (about twice the output prior to the crisis) and the operationalisation of an oil
mill by 2018. As concerns the forestry sector, there are plans for a forestry taxation study that will
lead to recommendations for improving sector governance, industrialization and increased budgetary
revenue from the sector.
2.2.3 In the mining sector, where production had slowed down significantly, owing to the
2013 embargo on diamond exports, activities resumed in 2016 with about 3,700 carats already
exported. With the lifting of the embargo and the measures to secure production areas as well as the
planned revision of the mining code, government intends to regain its pre-crisis production level of
just over 350,000 carats by 2018.
2.2.4 The financial sector in CAR remains the least developed of the CEMAC zone and its
contribution to economic recovery remains very limited. Only 1% of the population hold a bank
account and only 0.5% has access to credit. The absence of appropriate guarantee instruments, the
weaknesses of the judicial system and the scale of outstanding debts are the financial sector’s main
constraints. The sector’s overall liquidity increased in 2015 but the quality of bank assets remains
precarious.
2.2.5 At the level of public finances, government continued efforts to mobilise resources and
control expenditure, especially the payroll. Domestic resources, which had dropped by half
between 2012 and 2013, are going up gradually. In 2015, they reached 7.1% of GDP against 5.6 and
4.9 respectively in 2013 and 2014. The basic primary deficit dropped from -5.1% of GDP in 2014 to
-3% of GDP in 2015. However, the public debt, estimated at 48.5% of GDP in 2015, is weakening
the country’s financial sustainability. According to the external debt sustainability analysis carried
out by the International Monetary Fund (IMF) in 2016, CAR is classified as a country at high risk of
debt distress. This is due less to increase in public debt than to the collapse of GDP, tax revenue and
exports. On 20 July 2016, the IMF approved a three-year SDR 83.55 million (about USD 115.8
million) arrangement for the country under the Extended Credit Facility (ECF). Under this
programme, the IMF recommended that government use only concessional financing, with a grant
element of at least 50%.
2.2.6 In terms of prospects, real GDP is expected to grow by 5.1 % on average during the next
three years and inflation brought down to 3 % by 2019. For the year 2016, the GDP growth rate
should stand at 4.5 % in real terms, driven by the revival of activities in all sectors and the boosting
of public and private investments in the infrastructure sector (water, electricity). A supplementary
4
finance bill adopted in September 2016 provides for a basic primary fiscal deficit of about CFAF
34.7 billion (3.3 % of GDP). A review conducted by an IMF mission at the beginning of September
2016, concluded that economic and financial performances at the end of August 2016 were overall
in line with the programme’s objectives. Government should continue adjustment efforts to
gradually reduce the primary budget deficit to -1.9% of GDP in 2017 and -1.4 % of GDP in 2018,
which will help create the budget margins to finance poverty reduction expenditure and expand the
productive base.
Table 1 – Key Macroeconomic Indicators
(in percentage of GDP, unless otherwise indicated)
GDP (real) 2013 2014 2015 2016 2017
Est. Prel. Prog. Proj.
Real GDP growth rate (in %) -36.7 1.0 4.8 4.5 5.0
Inflation rate (annual average) 6.6 11.6 4.5 5.1 4.5
Current account balance – including grants -3.0 -5.6 -9.0 -10.1 -9.6
Broad money (annual variation in %) 5.6 14.6 5.3 11.8 13.3
Public debt 38.5 51.1 48.5 47.2 40.6
Including domestic debt 24.0 36.3 34.0 30.3 25.7
Gross official reserves (import months) 3.7 5.1 4.2 4.0 4.5
Primary budget balance -7.0 -5.5 -3.0 -3.3 -1.9
Budget balance, including grants -6.3 3.0 -0.6 -4.1 -2.9
Budget balance, excluding grants -9.3 -7.8 -7.8 -9.0 -7.2
Source: Estimates of the IMF and Central African authorities
2.3 The Economy’s Competitiveness
2.3.1 The country’s economy, which is based mainly on the primary sector, has gone down
sharply in terms of competitiveness since the onset of the crisis. The forestry sector, which before
the crisis contributed about 10% of GDP and nearly 50% of the country’s exports, was particularly
affected by the extent of looting of production tools as well as the displacement of the population.
The mining sector which accounts for about 5% of GDP also witnessed a dramatic drop in its
production with the embargo on the export of Central African diamond. According to the Kimberley
Process certification scheme, exports of rough diamonds amounted to 371,000 carats in 2012, before
the embargo in May 2013. In September 2016, diamond exports amounted to only 3,702 carats .The
business environment, which remains one of the least attractive in the world, is plagued by lack of
economic infrastructure (electricity, roads, telecommunications…), the prevailing insecurity in
several areas of the country, the high cost of business creation and difficult access to credit and
qualified human resources. The last World Bank 2015 Doing Business report ranks CAR in the 185th
position among 189 countries. The crisis severely weakened the private sector and the economy’s
competitiveness. Many enterprises have suffered significant material damage and financial losses
5
owing to acts of violence in the country and accumulation of State arrears of payment. to local
suppliers.
2.3.2 The measures envisaged by government to improve governance in productive sectors
will help revive mining and agricultural production. An audit of cotton subsector arrears was
carried out in 2016 with the support of the World Bank. This audit will lead to measures to clear the
arrears and a reform in sector governance. In the wood and mining sectors, the forestry taxation
reform and a new mining code should revive production. The Bank, through the Economic and
Financial Capacity Building Support Project (PARCGEF), provides support to revitalize private
sector promotion structures.
2.4 Public Finance Management
The public finance management system in CAR is based on a legal and regulatory framework,
which generally complies with international standards. However, it has many inadequacies at
the institutional level. In 2010, before the crisis, a public finance management assessment
according to the PEFA methodology, had highlighted weaknesses in the entire public expenditure
chain. Government had then adopted measures to improve budget credibility, public accounting and
control systems. The crisis plunged the country into bad practices, through the abusive use of
exceptional expenditure execution procedures and non-compliance with administrative, financial
and legal mechanisms. Thus, there are generally inadequacies in budget preparation, lack of
budgetary discipline and transparency, insufficient qualified human resources, lack of reliable
financial information and the absence of an adapted and robust information system..
2.4.1 The computerized public finance management system (GESCO), now used by Budget
and Treasury services, is affected by recurrent dysfunctions. This is one of the causes of delays in
the production of State financial statements. Indeed, public accounts have not been produced since
2007. The Court of auditors faces human and material constraints that undermine its abilities to
carry out external audit of public finances. It does not to date have financial autonomy.
2.4.2 The public contracts legal and regulatory framework, although generally in line with
international standards, has major weaknesses resulting mainly from the political and military
crisis in the country. Indeed, the organs provided for in the Public Contracts Code to ensure the
regular functioning of the procurement process are not adequately operational. The General
Directorate of Public Procurement (DGMP), responsible for public procurement control, functions
in a relatively acceptable manner but with very limited operational capacities. The country’s four
Procurement Services (SMP) do not seem to have the required capacities to meet the needs of all
contracting authorities. The Public Procurement Regulatory Agency (ARMP), the core of the
procurement system, is almost inexistent. Apart from the permanent secretariat, the other members
are not in place, particularly members of the Conflict Resolution Committee (CRD). Public
contracts have not been audited since 2010.
2.4.3 Since 2014, government has got down to restoring a public finance management system
that complies with international standards. The main measures concerned the reduction of
expenditure made from imprest funds; the creation and operationalisation of a Central Treasury
Accounting Agency (ACCT), which is trying to address the backlog in the production of the 2010
to 2014 management accounts. There are also regular meetings of the Treasury Committee and the
Monitoring and Public Finance Management Committee; and the gradual restoration of GESCO’s
functionality. These measures were supported by TFPs and the Bank through PUASCRE and
PARCGEF.
6
2.5 Inclusive Growth, Poverty Situation and Social Context
2.5.1 The country’s humanitarian and social situation remains precarious, especially as the
effects of destruction during the March 2013 crisis were intense. The incidence of poverty is
estimated at 76% in 2015 against 65% before the crisis. The unemployment rate is very worrying,
particularly among youths, who account for more than half of the population estimated at 4.9 million
inhabitants in 2015. More than 47% of the active population is jobless, which increases social
tensions. The crisis greatly affected the social situation of the population, with the destruction of
means of production and the disorganisation of services in charge education, health, social affairs
and agricultural supervision. The country further faces chronic food insecurity, which worsened with
the crisis. Indeed, a survey conducted in October 2013 by the Central African Institute of Statistics
and Economic and Social Studies (ICASEES), estimated that about 30% of the population is in
moderate or severe food insecurity. The nutritional situation has also deteriorated due to the depletion
of food consumption, the paralysis of health systems and lack of access to drinking water. It is
estimated that about 28,000 children suffer from severe acute malnutrition and 75,000 children from
moderate acute malnutrition. The 2015 UNDP World Development Report ranks CAR in the last but
one position in the world (187th among 188 countries), with a Human Development Index (HDI)
estimated at 0.350 in 2014.
2.5.2 At the health level, the last survey on health resource availability (HeRAMS) reveals that
about one-third of the country’s 1,008 health institutions have been partially or totally destroyed,
while 22% of health establishments are dysfunctional and 43% of health workers are community
workers without any basic training. The country finds itself with 1 medical doctor for 27,000
inhabitants against a standard of 1 medical doctor for 10,000 inhabitants. To date, the major
constraints faced by the health sector are: (i) inadequate national capital in infrastructure and
equipment, chronic shortage of skilled personnel and inadequate workforce, collapse of the national
supply system for inputs and pharmaceuticals, weak national health information system and low
health expenditure which is below the average for Sub-Saharan Africa. Government has a 2006-2015
National Health Development Plan (PNDS) and a 2014-2016 Transition Health Sector Plan (PTSS),
extended to 2017. The implementation of these plans, with the support of TFPs, should gradually
improve the situation.
2.5.3 The already weakened educational system was not spared by the severe consequences of
the crisis. Schooling had been virtually halted for two academic years, jeopardising the education of
more than a million children. Vocational centres were looted and destroyed. With the irregularity in
the recruitment of new teachers, the capacity of these centres was further reduced. According to a
Cluster Education survey in CAR, published in April 2015, the enrolment rate dropped by 6% in
2014-15, relative to the pre-crisis period (2011-2012). The fear of violence, shortage of teachers and
lack of school supplies were the main reasons for school dropout. However, the school map produced
in April 2016 indicates a gradually improving situation (76% of functional establishments). The
Ministry of Education has adopted a transitional plan covering the 2015-2017 period and extended
up to 2018. It intends to train 500 teachers per year from 2016 to 2018. However, their effective
recruitment is still hampered by the country’s limited budgetary resources.
2.5.4 The already difficult situation of women before the crisis deteriorated sharply with the
increase in gender-based violence (GBV). The Gender-Based Violence Information Management
System (GBVIMS), officially installed in 2014, has recorded 29% of sexual assault, 21% of rape,
18% of psychological violence, 16% of resource denial, 15% of physical assault and 1% of forced
7
marriage. The interventions of non-governmental organisations (NGOs) and other TFPs present in
the country aim to inform communities and encourage denunciation in order to ensure social and
psychosocial care for victims. Generally, gender equality is not yet established in CAR, although the
fundamental law adopted in December 2015 reaffirmed the country’s support for all International
Conventions to Eliminate All Forms of Discrimination against Women. The illiteracy rate remains
high among women: 68 % against 46.2 % for men. Women’s participation in decision-making also
remains low. The Central African parliament has 11 female members of parliament out of 128. On
the economic front, the production capacities of women operating mainly in the agricultural sector
have witnessed a sharp drop due to violence in the rural area. This situation has aggravated the
nutritional situation in the country. Government has committed to creating a Women’s Centre in
Bangui and in all the prefectures. This is an exchange forum for women from all horizons and with
various experiences that help strengthen their capacities. Legal systems will also be strengthened to
protect women’s rights. To this end, government intends to operationalise the Joint Rapid
Intervention Unit against gender-based sexual violence and a Centre for General Care of Victims of
Violence.
III. GOVERNMENT’S DEVELOPMENT PROGRAMME
3.1 Government’s Overall Development Strategy and Short-Term Priorities
3.1.1 During the 2013 to 2015 political transition, government had relied on the Sustainable
Recovery Emergency Programme (PURD). At the end of the political transition, government started
formulating a new Recovery and Peacebuilding (RCPCA) strategy with the support of key
development partners, including the Bank2. The new RCP strategy, which covers the 2017-2021
period, has three pillars: (i) support peace, reconciliation and security; (ii) renew the social contract
between the State and the population; (iii) ensure economic recovery and the revival of productive
sectors. Government estimates the financing needs to implement its development programme at
about USD 3 billion. In order to obtain financing, the government presented this new strategy at
Donors Roundtable in Brussels in November 2016 to raise funds. The Bank provides technical and
financial support to the Government in its preparation of the round-table documents and its advocacy
with major donors in the country.
3.1.2 For the 2016-2018 period, authorities will lay emphasis on the improvement of domestic
resource recovery with a view to increasing the fiscal space necessary for financing priorities. The
improvement of public finance management and the country’s humanitarian situation, private sector
promotion and the revival of productive sectors will be continued. PAREF’s alignment with these
government priorities gives assurances that the economic and social policy measures planned in 2016
and 2017 will be fully implemented.
3.2 Constraint to Implementing the National Development Programme
3.2.1 Most of the country’s constraints, identified under the Bank’s two previous support
operations are still relevant. Indeed, the return to constitutional order has not yet resulted in the total
normalization of the situation. Armed groups are still present on the territory and periodic clashes
occur. At the same time, intercommunity tensions continue and sometimes lead to violence with loss
of human lives. There are still more than 420,000 displaced persons and about 467,000 Central
African refugees in neighbouring countries. In the capital Bangui, the Moslem community, estimated
2 The Bank provided technical and financial support to government in the preparation of roundtable documents and advocacy with key donors
in the country.
8
at 36,000 persons, live in an enclave at PK5. The restoration of security and national reconciliation
are major challenges for the government. The health and education systems are also major
challenges, despite efforts made over the last two years to redeploy health personnel and teachers.
3.2.2 It should be noted that CAR’s fragility is not only due to the 2013 crisis, but also the result
of a long deterioration of the country’s economic, social, security and governance situation. The
analysis conducted by the Bank and several other TFPs revealed that the country’s key fragility
factors include lack of social cohesion, characterized by recurrent community conflicts; the weak
social contract between the State and the population due mainly to the poor quality of social services;
the weakness of the judicial system and the defence and security forces; the existence of disparities
between Bangui and the hinterland; poor natural resource management; non-treatment of past
traumas and impunity; the insecurity that has prevailed for many years consequent upon successive
rebellions and conflicts. The Bank’s comprehensive analysis on the country’s factors of fragility and
sources of resilience is presented in Technical Annex 4.
3.3 Consultation and Participation Process
The participatory process, which led to PURD’s preparation during the transitional period, was
maintained in the preparation of the new RCP strategy. The inclusive and collaborative approach
was based on: (i) broader consideration of the population’s needs by wider consultation of
stakeholders including civil society, the private sector and local authorities; and (ii) the organisation
of an international donor and investor conference.
3.3.1 This operation was prepared in a participatory manner through meetings in Bangui with
members of government, State structures, the private sector and TFPs. At the end of the preparation
and appraisal missions, review meetings were organised in the presence of all stakeholders to
harmonise and confirm the various programme measures.
IV. BANK SUPPORT FOR THE GOVERNMENT STRATEGY
4.1 Linkage with the Bank Strategy
4.1.1 PAREF is aligned with the Bank’s Interim Assistance Paper covering the 2014-2016 period
the second pillar of which concerns the restoration of institutional capacities and the promotion of
good governance. It should be noted that the Bank has started preparing a new country strategy paper
that will be aligned with the national RCPCA strategy.
4.1.2 PAREF will contribute to achieving government’s objectives for economic recovery and
the improvement of good governance. The programme is in line with the High Five institutional
priorities of the Bank’s new Service Development Model approved by the Board on 22 April 2016
as well as the Bank’s Ten Year Strategy (2013-2022) as concerns its priorities in Fragile States. It is
also consistent with the guidelines of the 2014 - 2018 Governance Action Plan (GAP II), and the
Bank’s Strategy for Addressing Fragility and Building Resilience in its regional member countries
during the 2014-20193 period For countries in a fragile situation like CAR, the various strategy
papers recommend measures that help build the State, strengthen basic economic management
capacities, and institute legitimacy thanks to the provision of public services for the resumption of
activities. Programme measures aimed at improving public finance management and the business
environment, and supporting the revival of activities, are in line with the above-mentioned strategies.
3 Ending Conflicts and Consolidating Peace in Africa – A Call for Action (ADB/BD/IF/2014/13 - ADF/BD/IF/2014/11) - 23 January 2014.
9
4.2 Compliance with Eligibility Criteria
4.2.1 The proposed general budget support (GBS) operation complies with the Bank’s policy on
programme-based operations adopted in March 2012 (ADF/BD/WP/2011/38). An analysis of the
country’s state of preparedness shows that CAR fulfils the conditions for use of GBS. Indeed,
government has prepared a new strategy paper in a participatory manner. The country’s
macroeconomic framework has improved in the last two years and prospects for accelerated growth
are good. The fiduciary framework presents high risks owing to the country context which does not
allow for the proper functioning of public finance control systems. Nevertheless, in agreement with
other TFPs, fiduciary risk mitigation measures were adopted and are being implemented by
government. These are: (i) the regular holding of treasury committee sessions with the participation
of TFPs; (ii) the holding of Public Finance Monitoring Committee meetings under the chairperson
of the Head of State; (iii) the continued streamlining of the public service file, with the technical and
financial support of UNDP and the World Bank; and addressing the 2010-2014 management
accounts backlog by the Central Treasury Accounting Agency. Other measures will complete these
actions, namely the preparation and dissemination of a budget execution manual, the conduct of
public procurement audits and the reduction of treasury advances. These measures will be monitored
under PAREF. A comprehensive analysis of the country’s state of preparedness is presented in
Annex 2 of this report.
4.3 Collaboration and Coordination with Other Partners
4.3.1 Prior to the March 2013 crisis, there was a comprehensive budget support framework
(CGAB) in the Central African Republic (CAR) which defined the donor coordination framework
in CAR. This framework has not yet been updated since 2014 during joint missions in CAR under
the aegis of the IMF from 2014 onwards. The preparation of this operation was carried out during a
joint mission in CAR in May 2016 with the IMF.
4.3.2 The appraisal mission’s aide-mémoire was distributed widely to all stakeholders with a
view to harmonising interventions. The World Bank is envisaging a general budget support in 2016
and 2017 to finance a State Consolidation Support Programme (PACE). The areas targeted are tax
revenue improvement, payroll control, budget transparency control, agricultural sector revival and
ICT sector promotion. The European Union (EU) has planned budget assistance in 2016, 2017 and
2018. Its reform programme is being formulated. The IMF, on its part, through its ECF-supported
programme, supports measures aimed at improving tax collection, financial and budget management,
and consolidation of the financial system. In the social area, the UNDP, humanitarian agencies and
NGOs are carrying out targeted actions in the areas of security, social, food security and drinking
water.
10
4.4 Linkage with Other Bank Operations
4.4.1 The Bank’s portfolio in CAR, as at 31 October 2016, comprises 5 national projects and
four regional operations for a total package of UA 75.09 million. The portfolio’s performance is
considered satisfactory despite the country’s volatile security situation. However, the various
supervision missions and portfolio performance reviews laid emphasis on two points and the lessons
learned are taken into account in the design of new projects. These are: (i) building the capacity of
project implementation units and establishment of an Inter-ministerial Project Monitoring and
Evaluation Committee; and (ii) building the capacity of local enterprises in the submission of bids
and implementation of works.
4.4.2 In the governance sector, the portfolio comprised PUASCRE-2, entirely disbursed, and
three institutional support operations including the Economic and Financial Management Capacity
Building Project (PARCGEF4). As noted earlier, PAREF is a continuation of measures already
technically supported by PARCGEF. These particularly are the improvement of the functionality of
the main public finance management tool (GESCO), the taxpayer and tax revenue management
system (SYSTEMIF) and the public debt management system (SYGADE). At the level of the
business environment and private sector promotion, PARCGEF provides support to the One-Stop-
Shop for Business Formalities (GUFE), the Chamber of Commerce and the Joint Consultation
Framework for Business Climate Improvement between the State and the private sector (CMCAA).
Figure 1 - CAR – Bank Portfolio as at 31/10/2016
Several PAREF measures result from
studies conducted under PARCGEF,
namely the assessment of losses and
damage suffered by enterprises
during the March 2013 events, the
study for the establishment of an
SME guarantee and investment fund
and the study for the establishment of
approved management centres. On
the social component and the DDRR,
PAREF is complementary to the
Emergency Basic Community
Reconstruction Support Programme
(PARCB), which aims, among others, at the socio-economic reintegration of more than 500,000
unemployed and out-of-school youths.
4.4.3 It should be emphasized that the key lessons learned from the implementation of
PUASCRE-1 and PUASCRE-2 have helped in preparing this operation. Thus, PAREF’s design was
based on the programme’s adaptation to the country’s fragile context. The programme first selected
measures that are likely to be implemented by government itself, or with the assistance of the Bank
and other technical and financial partners; the maintenance of continued dialogue with authorities on
programme objectives all along the preparation process by integrating the various developments of
the situation. Continued dialogue with authorities helped revise or postpone certain triggers.
4 PARCGEF has a disbursement rate of 70% on ADF resources and 49% on FSF resources. The project’s closing date is 30 December 2016.
Agriculture 1%
Social8%
Multisector22%
Water and sanitation
5%Energy30%
Transport32%
Environment2%
11
4.5 Analytical Works Underpinning the Programme
4.5.1 This report was inspired by several working reports and documents: the documentation
provided by authorities during joint missions, analyses contained in previous budget support
operations, reports from other TFPs and studies conducted under PARCGEF (study for the creation
of an SME guarantee and investment fund, assessment of losses and damage suffered by enterprises
during the 2013 crisis). The programme was also based on IMF reports (Article IV and the ECF-
supported reform programme); and aides-mémoires of World Bank missions. These documents
highlighted the country’s main constraints, by proposing the intervention thrusts.
V. THE PROPOSED PROGRAMME
5.1 Programme Goal and Objective
PAREF’s goal is to contribute to improving public finance management and reviving economic
growth. The programme will have an impact on the country’s economic growth and social situation.
5.2 Components, Objectives and Expected Results
5.2.1 The Economic and Financial Reform Support Programme (PAREF) seeks to consolidate
the improvement of public finance management and support the revival of productive sectors. The
programme will contribute to (i) improving tax collection; (ii) improving transparency and the
budget execution rate, especially in the social sectors and; (iii) consolidating economic growth
through an improvement of the business climate and governance in productive sectors (agriculture,
forestry and mining).
5.2.2 The programme will have two components: (i) Component 1 – Improvement of tax revenue
mobilisation and public expenditure management; (ii) Component 2 – Improvement of the business
environment and governance in productive sectors. The two components are complementary and
help revive economic growth in CAR. Tax revenue mobilisation and improved public finance
management will enable government to gradually create the fiscal space to support economic
recovery. The programme will be executed over 15 months, from October 2016 to December 2017.
5.2.3 Component I – Improvement of Tax Revenue Mobilisation and Public Finance
Management
5.2.4 Sub-component 1.1 – Improvement of Tax Revenue Mobilisation:
a) Problems and constraints: The 2013 crisis had led to almost total paralysis of
financial services, with the destruction and looting of administrative buildings,
means of transport and other working tools. This situation had considerably affected
the tax collection capabilities of customs and taxation services. With the support of
TFPs and the Bank through PARCGEF, the institutional capacities of taxation
services were gradually restored. PARCGEF provided rolling stock, IT and office
automation equipment as well as training. However, tax and customs revenue
mobilisation is still hampered by weak control of the taxable base and exemptions
as well as control systems. The mechanisms for granting exemptions are not well
mastered, resulting in enormous shortfalls for the country. A study conducted in
August 2016 with financing from the World Bank estimated the shortfall at CFAF
12
125.4 billion during the 2014-2016 period, or twice the annual tax revenue.
Regarding the tax base, the taxpayers’ database has not been updated for several
years. Furthermore, the information systems used by the customs service
(SYDONIA++) and the taxation service (SYSTEMIF) are either under-utilized or
limited.
b) Recent measures taken by government: Government took measures in 2014 and
2015 to address these difficulties. Thus, taxation and customs workers were
redeployed in the various regions and on the country’s main supply corridors, in
particular the main Bangui-Douala (Cameroon) corridor. Joint control brigades
were established to limit fraud and tax evasion. Measures were adopted in the 2016
Finance Law to broaden the tax base and simplify the tax system. These mainly are
the introduction of a specific taxation rate for micro and small enterprises,
submission to the reduced rate of VAT and customs duties for certain products
previously exempted and the introduction of the pre-filled declaration in property
taxation. Several other measures are also envisaged during the period 2016-2018,
notably the revision of the price structure of petroleum products; better monitoring
of exemptions; the revision of the tax system in the diamond and wood
subsectors; census of taxpayers; harmonisation of the General Tax Code with the
CEMAC Directive on excise duties related to taxation on mobile telephony; better
dissemination of tax instruments; improvement of the tax revenue information and
management system; deployment of customs services in other border posts that
have remained closed since the onset of the crisis; and the interconnection of
Central African customs services with those of Douala for better control of goods
coming from Cameroon.
c) PAREF-supported measures: Produce a report on the review of exemption
agreements effective as at 30 August 2016, showing exceptional exemptions
(Prerequisite); Revision of the terms for approving draft agreements on exceptional
exemptions in order to better control exemptions (2017 trigger); Updating of the
taxpayers’ database (2017 trigger); Updating and dissemination of the General Tax
Code (CGI); Interconnection of Central African customs services with those of
Douala with a view to limiting cases of false declaration of goods; Measures to fight
against fraud on VAT (joint control with the customs service based on crossed risks)
– at least 5 controls carried out per year; and Review of the agreements on
exemption measures that will expire on 31 December 2016 (2017 trigger).
13
5.2.5 Sub-component 2.2 – Improvement of Public Expenditure Management:
a) Problems and constraints: At the level of public expenditure management, the
country was confronted in 2013 with a loss of budget expenditure control, through
abusive use of exceptional procedures, notably the use of imprest funds and public
procurement by mutual agreement. The inadequacies of the computerized public
finance management system, GESCO, had paved the way for bad practices, by
weakening public expenditure control capacities. Government was unable to pay all
the salaries of civil servants. The domestic debt to State suppliers and banks
increased while social expenditure, excluding salaries, was executed at less than
12%. Public finance management is still hampered by weaknesses in the budget
preparation process, commitment and procurement plans, the low capacity of
procurement units and the generalization of public procurement by direct
negotiation, the non-conduct of public contract audits since 2010, the public
contracts institutional regulatory framework that remains incomplete; the low
capacity of credit administrators and managers, due mainly to their replacement
almost every fiscal year, and the non-production of public accounts since 2007.
b) Recent measures taken by government: With the support of TFPs, GESCO was
made partially operational and a Central Treasury Accounting Agency (ACCT) was
established in 2014. Furthermore, monthly meetings of the Treasury Committee
were instituted. The census of State employees with the support of the World Bank
and UNDP, helped in partially cleaning up the public service file and making some
payroll savings. Other measures are underway for better compliance with financial
orthodoxy. These include, among others, the establishment of a nomenclature of
expenditure supporting documents; improvement of the public expenditure
information and execution system; reduction in the use of exceptional procedures;
resumption of public procurement audits as well as addressing the public accounts
backlog..
c) PAREF-supported measures: PAREF will support the following measures:
Preparation of a budget preparation guide (prerequisite); Preparation of expenditure
commitment and procurement plans by all ministries, particularly the ministries of
health, education and social affairs; Review of instruments on the appointment of
credit managers and administrators and preparation of an expenditure execution
procedures manual (2017 trigger); Appointment of credit managers and
administrators within the statutory time-limits by all ministries, particularly the
ministries of health, education and social affairs; Abolition of imprest funds for
missions (excluding imprest funds for the Presidency and the Prime Minister’s
Office); Appointment of members of the Conflict Resolution Committee in ARMP
(2017 trigger); Conduct of public contract audits from 2012 to 2015 ; Budgetary
allocation for the implementation of the assistance strategy for female victims of
violence; Budgetary allocation for the strengthening of public services in charge of
health and school equipment and supplies, the national health information system
as well as the implementation of the training and deployment plan for the additional
workforce in the education and health sectors; Increase in the budget execution rate
(excluding salaries) of the education, health and social affairs sectors to about 50%
in 2017 against 12% in 2014.
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5.2.6 Component II – Improvement of the Business Environment and Governance in
Productive Sectors.
5.2.7 Sub-component 2.1 – Improvement of the Business Environment and Support to
SMEs:
a) Problems and constraints: The business environment in CAR deteriorated
considerably with the March 2013 crisis. Enterprises are hampered by the shortage
of economic infrastructure (energy, running water, roads…), difficult access to
financing, the State’s arrears of payment to suppliers and the low capacity of private
sector support structures. In addition to that there were losses and material damage
suffered by enterprises during the 2013 crisis. PMEs are particularly impeded by
the absence of a legal framework specific to their situation and the reticence of
commercial banks to give them credit in the absence of adequate guarantees.
Furthermore, support for support structures remains weak.
b) Recent measures taken by government: The Government has taken measures to
improve dialogue with the private sector. The Joint Consultation Framework for
Business Climate Improvement (CMCAA) was made operational in November
2015 by appointing its members with a view to conducting inclusive dialogue on
business climate improvement measures. Several other measures are underway with
Bank support through PARCGEF, in particular the improvement of the services of
the Single Window for Business Formalities (GUFE); the Chamber of Commerce
and the Centre for Support to SMEs and the Craft Industry (CAPMEA) and several
other studies that will lead to the establishment of an SME guarantee and investment
fund as well as approved management centres; clearance of the State’s arrears to
suppliers; adoption of business support and revival measures to mitigate the effects
of losses and damage suffered during the 2013 crisis. Government should continue
these efforts in order to improve the country’s rating in the World Bank’s Doing
Business ranking.
c) Programme-supported measures: In line with PUASCRE-2, PAREF will support
the following measures: Validation of the report on the assessment of losses
suffered by enterprises during the 2013 events (prerequisite) and adoption of
measures to support the private sector in relation to losses suffered during the
2013 events; Audit of State arrears/liabilities for the 2012-2014 period and adoption
of a plan for clearing these arrears and liabilities (2017 trigger); completion of the
study for the establishment of a National Private Sector Guarantee and Support
Fund; completion of the study for the creation of an approved management centre
within the Chamber of Commerce, Industry, Mines and Crafts (CCIMA) ;
Operationalisation of the CGA in Bangui ; Establishment of a financial
management system for the Single Window for Business Formalities; and GUFE’s
decentralisation to Berberati.
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5.2.7 Sub-component 2.2 – Revival of Productive Sectors:
a) Problems and constraints: The activities of productive sectors were suspended or
greatly reduced due to the crisis. The mining sector, in particular, is dominated by
small-scale production, with little change at the national level. The mining sector’s
contribution to GDP and budget revenue has remained very low since 2013. The
wood sector offers considerable potential (50 % of exports and second generator of
employment in the country after agriculture) and remains to date the country’s main
source of foreign exchange. However, the sector is still affected by weak
governance and an ill-adapted tax system resulting in contradictions in wood export
declarations and low revenue recorded by the State. On the agricultural front,
cotton, the country’s main export crop before the crisis, is affected by the
destruction of sector production tools, State arrears to cotton farmers and other
subsector actors and poor sector governance. Government has prepared an action
plan for its revival and targets a production of about 50,000 tonnes of cottonseed
and the operationalisation of an oil mill by 2018.
b) Recent measures taken by government: In the mining sector, lifting of the embargo
on diamond exports in June 2015 opened prospects for the sector’s revival. The
downward revision of the sector’s tax system in the 2016 Finance Law made it
possible to register thousands of artisans. Government efforts have made it possible
to bring four diamond producing areas in the country’s west (Berberati, Boda,
Carnot and Nola) into compliance in 2016. Government intends to extend the
compliance area to at least five other towns by the end of 2017 (Gadzi, Bouar, Abba,
Bozoum and Baoro). Other measures are also planned in the mining sector, notably
the downward revision of export taxes on diamond and gold; and the review of the
Mining and Petroleum Code to make it more competitive.
In the forestry sector, government has adopted a new Forestry Code to make it more competitive.
It has also revised the tax system to ensure more equitable redistribution to local communities. It
has further signed a Voluntary Partnership Agreement (VPA) with the European Community,
within the framework of the international process for the implementation of forestry regulations,
governance and trade in wood and its by-products. However, only 6 out of 14 exploitation and
development permits granted in the south-west massif are operational and crossed debts between
enterprises and the State persist. In this context, government intends to conduct a study on forestry
taxation and para-taxation to make the sector more competitive. An audit of the taxation situation
of forestry companies and an action plan to clear crossed debts/liabilities will be carried out.
In the agricultural sector, government’s ambition now is to increase the share of agriculture in
national wealth in the very short term in order to ensure greater food security, create new jobs for
youths, encourage agricultural entrepreneurship and foster the economy’s diversification and
reflation. To this end, a roadmap was prepared in January 2016, taking into account the sector’s
enormous potentials and its various constraints. It is in line with the National Agricultural
Investment, Food Security and Nutritional Programme (PNIASAN) and the Country Programming
Framework (CPF), updated to take the main concerns into account, in particular the vulnerability
of grassroots communities, intercommunity conflicts, youth unemployment and poor governance,
etc. Several important measures are planned, in particular the adoption of the decree on the
organisation and operation of the Central African Agency for Food Health Security; approval of
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the organic instruments of the Ministries in charge of agriculture, livestock and the environment;
publication of the law on agricultural professional organisations; and adoption of the enabling
instruments of the 2001 law on the establishment and code of ethics of the National Association
of Veterinary Doctors. As concerns cotton, government intends to clear arrears and consolidate the
sector’s management with the support of the World Bank.
c) PAREF-supported measures: In the mining sector, continued implementation of
measures for the compliance of at least 5 other production areas in 2017; and
revision of the mining code (2017). In the agricultural sector, publish the agro-
pastoral land code to ensure secure access to land by agricultural producers and
promoters (2017); adopt a decree on the organisation of the profession of farm
adviser (2017); deploy supervisors in the rural sector (2017); clear cotton sector
arrears (2017 trigger); update the PNIASAN (prerequisite); adopt a decree on the
organisation and operation of the Central Agency for Food Health Security (2017).
In the forestry sector, finalize the forestry policy (2016); adopt a decree on the
enabling instruments of the Environmental Code (2017); conduct a study on
forestry taxation and para-taxation in order to make the forestry sector competitive
(2017).
5.2.8 Programme results: The implementation of programme measures is expected to result in
(i) an increase in tax revenue from 7.1% of GDP in 2015 to 8.7% of GDP in 2017; (ii) a reduction
in public procurement by direct negotiation from 90% in 2015 to less than 50% in 2017; (iii) a
reduction in the number of business creation days from 22 days on average in 2015 to at least 14
days on average in 2017; and (iv) decrease in the cost of starting a business from 204% of income
per capita in 2015 to less than 150% of income per capita.
5.3 Policy Dialogue
PAREF is a policy-based reform, which comes after two crisis response budget support operations
in CAR. In this context, dialogue will focus on reforms and measures that will have more structuring
effects on the country’s medium-term economic and financial situation. These are particularly the
mastery of exemptions; updating of the taxpayers’ database; the improvement of budget execution,
especially in the social sectors; the establishment of a new integrated public finance management
system to replace GESCO, which has shown its limits; the operationalisation of all public
procurement regulation bodies and institutions; and the strengthening of governance in the cotton,
mining and forestry sectors. Dialogue on these issues will be conducted jointly with other TFPs.
5.4 TSF Grant and TSF and ADF Loans Conditions
5.4.1 Preliminary Measures
On the basis of dialogue between the Bank and government, the latter plans to implement measures
precedent to the programme’s presentation to the Boards of Directors. These conditions are indicated
in the box below:
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(i) Satisfactory programme review supported by the IMF’s ECF;
Evidence: IMF Press Release after the October 2016 review
(ii) Produce a report on the review of exemption agreements in force as at 30 August 2016, showing
exceptional exemptions (Prerequisite);
Evidence: Copy of the report forwarded to the Minister of Finance and Budget
(iii) Produce a methodological budget preparation guide;
Evidence: Copy of the Guide forwarded to the Minister of Finance and Budget
(iv) Finalize and validate the report on the assessment of losses and damage suffered by enterprises during
the 2013 crisis;
Evidence: Copy of the validated report forwarded to the Minister of Finance and Budget
(v) Update the National Agricultural Investment, Food Security and Nutritional Programme (PNIASAN)
Evidence: Copy of the updated PNIASAN forwarded to the Minister of Finance and Budget
5.4.2 Triggers
Since the programme is a programme-based operation, it has triggers for the year 2017. These triggers
concern measures on which the Bank has been conducting dialogue with other TFPs since 2014.
These measures are mostly supported by TFPs and the Bank through PARCGEF, for economic and
financial issues, or the Emergency Grassroots Community Reconstruction Support Programme
(PARCB), for social issues.
Table 2 – Preliminary measures and triggers
Component Preliminary measures Triggers related to Phase 2
Component 1: Improvement of tax revenue mobilisation and public expenditure management
Satisfactory programme
review supported by the IMF’s
ECF
Status: An IMF mission was in CAR
in September 2016 and expressed
satisfaction with the state of
implementation of ECF-supported
programme measures
Census of taxpayers and update of the
taxpayers’ database in the new tax revenue
management information system
Status: census preparatory work has started
with PARCGEF support
Factual elements required: IMF press
release after the review mission
Produce a report on the review
of exemption agreements
effective as at 30 August
2016, showing exceptional
exemptions (Prerequisite);
Status: Preliminary report available Review of instruments on the terms of
approving draft agreements on exceptional
exemptions
Status: A study on the situation of
exemptions was conducted with the support
of the World Bank
Factual elements required: Copy of
the finalized report
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Adoption of a methodological
guide for budget preparation;
Status: Existence of a preliminary
guide
Review of instruments on the designation of
credit managers and administrators for better
definition of the terms of their appointment
and their duties; adoption of a procedures
manual for expenditure execution
Status: A draft instrument is being examined
by the Ministry of Finance and Budget;
Existence of a preliminary manual
Factual elements required: Copy of
the finalized guide
Component 2 : Improvement of the business environment and governance in productive sectors
Finalization of the assessment
of losses and damage suffered
by enterprises during the 2013
crisis
Status: Report on the assessment of
losses prepared with PARCGEF
support. Its validation is underway.
Adoption of a plan for clearance of arrears
and liabilities (indicative trigger)
Status: The audit of the 2012 to 2014 arrears
is under way Factual elements required: Copy of
the report validated by authorities
Updating of the National
Agricultural Investment, Food
Security and Nutritional
Programme (PNIASAN)
Status: Preliminary report available Total clearance of cotton sector arrears
(indicative trigger)
Status: An audit carried out with the support
of the World Bank assessed the arrears
Adoption of a decree on the enabling
instruments of the Environmental Code
Status: Draft instrument being prepared Factual elements required: Copy of
the finalized report
5.5 Application of Good Practice Principles on Conditionality
In accordance with the international consensus on good practices reflected in the Bank Group’s
Policy on Programme-based Operations (PBO). This operation is aligned with good practices
regarding conditionalities, namely; country ownership, burden sharing, disbursements predictability
and realistic measures. The Bank's financing was backed by conditionalities discussed and shared
with other TFPs, in the absence of a matrix of common measures. All measures adopted by the
programme were proposed by various State structures and validated by authorities, after verifying
their realism in the country’s post-crisis context. The predictability of disbursements is ensured by
the programmatic nature of the operation, which provides flexibility in the conditionalities
5.6 Financing Needs and Mechanisms
5.6.1 The overall budget deficit (settlement base) in 2016 and 2017 (excluding programme
grants) is projected at CFAF 43 and 32.8 billion, respectively. This deficit stems from the low tax
revenue and the level of fixed expenses to restore economic and social infrastructure. Budget
revenue, including project grants, is projected at CFAF 135.4 and 153 billion respectively in 2016
and 2017, or respective increases of 31% and 48% compared to the 2015 revenue and project grants.
Public expenditure is also increasing, but to a lesser extent than revenue, in order to gradually
improve the basic primary balance. Financing needs stand, respectively, at CFAF 50 and 48 billion
in 2016 and 2017. Taking into account the Bank’s financing, they drop to CFAF 41.5 and 39.8
billion, respectively. Financing planned by the other TFPs will help cover the residual gap. The IMF
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approved financing under the ECF for the years 2016, 2017 and 2018, for an overall amount of SDR
83.55 million (about CFAF 68.6 billion). The European Union plans general budget assistance of
EUR 45 million (CFAF 29.5 billion) under the 11th EDF, for the 2017-2019 period. As for the World
Bank, it has started preparing a State Consolidation Support Programme (PACE), with an indicative
financing of USD 50 million (CFAF 29.4 billion) for the 2016-2018 period.
Table 3 – Projected financing needs and sources (in CFAF billion)
2014 2015 2016 2017
Est. Prel. Prog. Proj.
Total revenue and grants 58.6 103.1 135.4 152.0
Including: grants (excluding budget support) 17.3 36.6 45.5 50.0
Total net expenditure and loans 107.3 140.0 178.4 185.8
Including: interest payments 5.5 5.4 7.6 5.8
Including: capital expenditure 18.1 43.7 64.7 69.7
Overall balance (commitment base) excluding programme
grants -48.7 -36.9 -43.0 -33.8
Including basic primary balance -43.1 -27.7 -34.7 -21.0
Accumulation of arrears ( (-) = reduction) -13.9 -10.1 -5.6 -7.5
Overall balance (settlement base) excluding programme grants -62.6 -47.0 -48.6 -41.3
External financing (net – less Bank contribution) 63.1 31.0 -4.5 -2.4
Domestic financing (net) 3.3 22.9 3.1 -4.3
Bank contribution 11.4 6.1 10.1 8.2
Financing 77.8 60.0 8.7 1.5
Errors and omissions -15.2 -13.0 0.0 0.0
Financing need 0.0 0.0 39.9 39.8
Financing identified 0.0 0.0 39.9 39.8
World Bank 8.8 8.8
IMF 19.9 19.3
European Union 10.8 9.8
Others 0.4 1.8
Residual financing gap 0.0 0.0 0.0 0.0
Source: IMF, Central African authorities and Bank estimates
5.6.2 The IMF already disbursed the first tranche of its assistance in July 2016, for an amount of
CFAF 10.6 billion. In October 2016, the European Union disbursed CFAF 5.9 billion as assistance
provided for under the 10th FSF. The World Bank, for its part, plans to disburse a sum of CFAF 8.8
billion in December 2016. Finally, CAR will receive budget support during the next three years,
which will allow for the close monitoring of reforms and measures to ensure sustainability of results.
5.7 Application of Bank Policy on Non-Concessional Debt Accumulation
CAR is in the category of countries with access only to ADF resources. In 2016, the IMF updated
the debt sustainability analysis (DSA), which confirmed that the risk of debt distress remains high.
The IMF advised government to adopt a prudent debt policy consisting in prior use of grants and the
financing of any residual financing needs through concessional loans, with a grant element of at least
50%. With regard to the Bank, budget support under the PAREF will be financed with a TSF grant
and concessional ADF and TSF loans. These loans are zero-interest loans with a 40-year maturity
and a 10-year deferral. The grant element is estimated at 61%, in line with the 50% required by the
IMF.
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VI. PROGRAMME IMPLEMENTATION.
6.1 Programme Beneficiaries
The programme’s final beneficiaries are the same as those of the previous programme: the entire
Central African population, or nearly 4.9 million inhabitants, and particularly the vulnerable
segments. Directly, the programme will benefit government by helping close the financing gap.
6.2 Social and Gender Impact
6.2.1 The programme will have a positive impact on the country’s humanitarian situation, thanks
to its support to the implementation of social measures. These mainly are budgetary allocations in
2017 for the strengthening of public services in charge of health and school equipment and supplies
as well as the national health information system; and for the implementation of the training and
recruitment plan for the additional workforce of the education and health sectors and its deployment,
taking into account regional balance. The programme will also impact on the living conditions of
women through agricultural, mines and forest sector revival as well as budgetary allocations in 2017,
and implementation of the assistance strategy for women and girls who are victims of violence.
6.3 Impact on Climate Change
The proposed programme is a general budget support operation. It will not have any impact on the
environment, and is classified in Category III. Nevertheless, the programme supports the adoption
of one of the enabling instruments of the Environmental Code in order to strengthen the consideration
of environmental aspects in the design of development programmes.
6.4 Implementation, Monitoring and Evaluation
The Ministry of Finance and Budget, as the chair of the Public Finance Reform Steering
Committee (CPR), will be responsible for the implementation of PAREF. The CPR comprises
officials of action plan implementation structures (Ministry of Finance and Budget, Finance
Committee of the National Assembly, Court of Auditors, General State Inspectorate, Public
Contracts Regulatory Agency), a representative of the Civil Society and representatives of TFPs.
The Ministry of Finance and Budget will ensure that the administrative structures concerned play
their full roles in the implementation of specific measures in their respective areas of competence.
Daily programme monitoring and evaluation will be the responsibility of the Economic and Financial
Reform Monitoring Unit (CS-REF), which will, on a quarterly basis, prepare a report on the
implementation of PAREF-supported measures and reforms..
6.5 Financial Management and Disbursement
6.5.1 Country Fiduciary Risk Assessment
Fiduciary risk assessment (FRA) related to CAR’s public finance management (PFM) system was
carried out by the Bank, as part of PAREF’s preparation in September 2016. This assessment is in
accordance the Financial Management Policy for Operations financed by the Bank Group, the
February 2014 directive on the Promotion of the Use of National PFM Systems and the March 2014
21
operational directives for programme-based operations (PBOs). It follows from the assessment that
the initial overall fiduciary risk is “high”, due to inadequacies noted in the current public finance
management system despite the good governance promotion and public finance consolidation policy
pursued by government. Public finance reforms are numerous and can only be achieved in a situation
of sustainable stability in the country and a relatively sufficient time before the full results can be
achieved. Difficulties related to the country’s current fragile context, poor governance and corruption
are factors that do not promote the effective implementation of PFM reforms in the short term. The
implementation of measures identified to mitigate the fiduciary risk go beyond Bank support. It
requires government’s commitments and the combined efforts of all technical and financial partners
in the country. Table 7 in the annex presents the risks considered high and the mitigation measures.
The technical annex gives details of analysis on fiduciary risks..
6.5.2 Financial Management and Disbursement Mechanisms
Financial management: This programme is a budget support operation (non-targeted),
whose objective is to help government finance the budget gap and implement reforms.
Despite the high fiduciary risk level related to the use of the national PFM system,
PAREF resources will be managed by the same system. Consequently, the Ministry
of Finance and Budget, through the Central Treasury Accounting Agency (ACCT)
will be responsible for monitoring the administrative, financial and accounting
management of the said resources. The treasury committee (which includes TFPs)
will continue to play its full role. So, the Bank and authorities have agreed on a
specific mechanism for monitoring financial flows relating to the programme. This
has to do mainly with (i) depositing programme resources in two special account at
the BEAC’s headquarters; (ii) adequately recording operations on the said account
with a view to producing reliable financial information in real time; and (iii) ensuring
that an audit of financial flows is carried out by an independent external firm, at the
end of the operation.
Disbursement: The annual financing of UA 11.54 million, will be disbursed in a single
tranche subject to fulfilment, by the borrower, of relevant general and specific
conditions as mentioned in Section 7.2 below. At the request of the borrower, the
Bank will disburse the funds into the two special accounts opened in the books of the
National Branch of BEAC in Bangui. The second annual tranche, estimated at UA 10
million, will be disbursed in 2017 after approval by the Boards of a simplified report
on the status of implementation of the 2017 triggers. Therefore, a separate loan/grant
agreement will be prepared for each phase of the programme-based operation.
6.5.3 Procurement
The legal and regulatory framework of CAR’s public contracts is based on Law No. 08.017 of 6 June
2008. It follows from the assessment made by the Bank in September 2016 that this framework, on
the whole, is a satisfactory basis on which to build a coherent national procurement system. The
review of national procedures for National Competitive Bidding conducted by the Bank in 2012 had
already concluded that they are generally in conformity with relevant international standards.
However, it should be noted that the socio-political crisis has led to a weakening of control
mechanisms for the process of procurement and execution of public contracts. The institutional
entities responsible for ensuring the system’s regular functioning, in particular regulation,
22
procurement services, control and complaints management are not sufficiently functional; this does
not guarantee the effectiveness of the procurement process and the system’s integrity. The Bank
maintained dialogue with government on measures to restore and revitalize the public contracts
institutional framework. In this respect, the establishment of the structures of the Public Contracts
Regulatory Agency is a fundamental link for achieving the system’s integrity objectives. In view of
efforts made by the Government and measures agreed on under this operation, the Central African
public procurement framework, which is in a positive improvement trend, is a satisfactory basis for
a budget support operation.
VII. LEGAL DOCUMENTATION AND AUTHORITY
7.1 Legal Documents
The legal documents that will be used under the programme are:
Loan Agreement on ADF resources in an amount not exceeding UA 2.7 million signed
between the ADF and the Central African Republic;
Loan Agreement on TSF resources (Window 1) in an amount not exceeding UA 8.02
million signed between the Bank and the Central African Republic; and
A Letter of Agreement on TSF resources in an amount not exceeding UA 1.56 million
signed between the Bank and the Central African Republic.
7.2 Conditions Associated with Bank Intervention
The prerequisites for the review of this transaction by the Boards have been described in
paragraph 5.4.1. The Ministry of Finance has forwarded the documents attesting to the
implementation of the preliminary measures to the Bank’s field office in the CAR. At this
point, all conditions have been met. The other conditions related to the Bank’s intervention are
prerequisites for implementation and disbursement.
Condition precedent to effectiveness: The effectiveness of each TSF and ADF Loan Agreement shall be
subject to (i) the signing of both Agreements by the Central African Republic (the Borrower) and the
Bank; and (ii) the Borrower’s fulfilment of the conditions set forth in Section 12.01 of the General
Conditions Applicable to the Loan and Guarantee Agreements of the African Development Bank.
The effectiveness of the TSF grant is subject to the signing of the Agreement Letter (TSF) by the Central
African Republic (Donee) and the Bank.
Conditions precedent to disbursement of the 2016 annual tranche: In addition to the above-mentioned
effectiveness condition, disbursements of ADF grant and TSF grant resources are subject to the following
precondition:
Provide evidence of the opening, in the books of the National Branch of BEAC in Bangui, of two special
accounts to receive ADF grant and TSF grant resources. In addition to the above-mentioned effectiveness
conditions, disbursements of TSF grant resources and TSF and ADF loans are subject to the following
precondition:
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Provide evidence of the opening of three special accounts, in the books of the BEAC National Directorate
in Bangui, to receive TSF grant resources, as well as ADF and TSF loans.
7.3 Compliance with Bank Group Policies
PAREF is in line with the guidelines of the Bank’s Ten Year Strategy and, more particularly, the
pillar on governance. It is also consistent with the Bank Group Policy for Programme-based
Operations, particularly the instrument relating to general budget. No exception is requested in
relation to these Directives in this proposal.
VIII. RISK MANAGEMENT
Table 5 below globally presents the risks that can affect programme implementation or the
achievement of results.
Table 4 – Risks and mitigation measures
Risks Mitigation measures
Political and security risk related to the fragility of
public institutions and the prevailing climate of
insecurity in certain areas in Bangui and the country’s
provinces
This risk is mitigated by the return to constitutional order and gradual
DDRR implementation.
Macroeconomic risk: High economic crunch and
dependence on external assistance
Recovery of activities and exports in the mining sector, commitment of
TFPs for budget assistance during the three coming years.
Fiduciary risks: High imbalances on the budget
process and control systems
Reform programmes supported by the IMF and other TFPs include
measures to improve public finance management and transparency.
IX. COMMENDATION
Considering the foregoing, it is recommended that the Boards of Directors approve a TSF grant not
exceeding UA 1.56million, a TSF loan not exceeding UA 8.02 million and an ADF loan not exceeding
UA 2.70 million for the Central African Republic to finance the Economic and Financial Reform
Support Programme (PAREF).
I
ANNEX 1 – The Government’s Development Policy Letter
1. This development policy letter provides an update on the political context as well as the
government’s strategic thrust relating to economic and social matters. It recalls the
economic and financial policies currently being pursued by the government of the Central
African Republic (CAR) and places them in a medium-term implementation context.
2. In a context of stabilization and gradual exit from the security and political crisis
experienced by the country since 2013, the government is facing major economic and
financial challenges and the many expectations of the population. Our strategic priorities
for restoring growth and reducing poverty are: (i) restoring the security and sustainability
of public finances; (ii) supporting external competitiveness and diversifying the
foundations of economic activities to create the conditions for sustainable and inclusive
growth; (iii) establishing the basis for good governance; and (iv) strengthening the
country’s institutional framework and administrative capacity.
3. The government’s reform strategy will be supported by the "Support Programme for
Economic and Financial Reforms - PAREF". The programme will be implemented over
two years (2016 and 2017). The programme’s objective is, on the one hand, to improve
the mobilization of tax revenues and control public expenditure and, on the other hand,
to improve the business environment and governance of productive sectors.
I. CONTEXT
4. The recent organization of democratic elections marked the end of a three year
transition. The referendum on the new December 2015 constitution and the elections of February
2016 involving presidential and legislative elections were organized in a peaceful atmosphere.
This resulted in a return to constitutional legality and the establishment of state institutions
guaranteeing more transparent and efficient governance with better prospects for the CAR if the
security problem is solved.
5. The country is slowly emerging from the political and security crisis of 2013 which
resulted in a major humanitarian crisis, the collapse of the economy and administration and a
marked weakening of internal financial resources. In the face of the major challenges facing the
country, the government is firmly committed to promoting national reconciliation and social peace.
We also want to consolidate security, in particular, through the demobilization, reintegration and
repatriation of armed groups. Finally, our priority is also to effectively implement an
administrative, economic and financial reform programme to ensure economic recovery and
reduce poverty. These reforms aim to improve human and administrative capacity by redeploying
the administration; promoting transparency and admissibility; consolidating basic budget
management through increased tax revenues and better control and allocation of public
expenditure. As such, they aim to increase spending in priority sectors while ensuring a return to
external debt sustainability and economic recovery.
6. The security situation is gradually improving. Securing the country was supported by the
international community, with the establishment of the international mission to support CAR under
the leadership of the African union (MISCA) and the French SANGARIS force. The transfer of
II
peacekeeping operations to the United Nations Multidimensional Integrated Stabilization Mission
in the Central African Republic (MINUSCA), mandated by the United Nations in September 2014,
enabled the gradual deployment of peacekeepers throughout the country and European forces
(EUROFOR). However, failure to disarm and demobilize ex-combatants is a constraint on a strong
economic recovery. Moreover, it is necessary to pursue reforms of the country’s national security
forces.
7. The international community’s was crucial in resolving the crisis. In addition to
humanitarian assistance, CAR has receive multi-faceted support which has enabled the authorities
to (i) cope with the impact of the crisis on the populations, especially through the provision of
public services; (ii) promote the resumption of economic activities in the country; and (iii)
implement economic, financial and administrative reforms. These have reduced the primary deficit
from seven percent (7 percent) of GDP in 2013 to three percent (3 percent) in 2015, and improve
revenue mobilization while controlling spending. These key reforms include: the establishment of
a treasury management committee; the operationalization of the Treasury’s Central Accounting
Agency (ACCT), better control and collection of taxes and customs; payroll control through
careful examination of the civil service roster, gendarmes and police officers. All this through the
adoption of a public finance reform action plan.
8. Moreover, economic recovery has been slow and will not quickly compensate for the
36.7% GDP contraction that occurred in 2013. The country is still heavily dependent on foreign
aid to finance its primary expenditure, including wages, pensions and debt repayment. At end
2015, domestic revenue covered only 73% of expenditure. Finally, there are several structural
rigidities, including lack of electricity, inadequate infrastructure, high transport and
telecommunications costs, a weak educational system and a weak financial sector. These structural
rigidities are slowing down the economic recovery and hampering private investment.
9. The security and political stabilization achievements as well as the resumption of
economic activities recorded in 2015 enabled the government to request a supervision mission
from the IMF under Article IV and the preparation of an Expanded Credit Facility (ECF). This
mission, conducted with the participation of other partners (World Bank, African Development
Bank, European Union), took place in May 2016. It made it possible to assess the country's
macroeconomic framework and identify economic and financial reform measures. The IMF's
Board of Directors approved the government's programme supported by the ECF on 20 July 2016.
Support from the Bank, the IMF and other technical and financial partners has also led to the
production of a set of analytical studies. They have therefore been used to prepare strategies and
action plans for economic, financial, administrative or sector reforms.
II. GOVERNMENT PROGRAMME
10. The government’s general policy statement was presented to the national assembly at the
beginning of June 2016 and approved by a vote of confidence. This, translated into a government
programme, is structured around four pillars: (i) peace, security and social cohesion; (ii) economic
recovery; (iii) politics and good governance; and (iv) social affairs and humanitarian actions.
11. These guidelines are inspired by the recommendations from the Bangui National Forum,
enriched by the recent debates, as well as many meetings, including different categories of actors.
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The authorities, with the support of their technical and financial partners, finalize an assessment
of the priorities and needs for rehabilitation and peacebuilding in CAR. This evaluation, which
will be used to guide the government's economic and social development policies, was presented
to the donor conference on 17 November 2016. The policy statement will be one of the reference
documents for the interventions of development partners and the financing of development
projects identified for the 2016-2018 period according to the following priorities:
1. Peace, Security and Social Cohesion
12. According to the country’s president, sustainable security and social cohesion are the first
priorities. To this end, the government intends, once resources are mobilized, to implement the
Disarmament, Demobilization, Reintegration and Repatriation (DDRR) process and the Security
Sector Reform (SSR). This is a precondition for stabilization and economic recovery.
13. A national security policy with a view to realizing the actions to be implemented will be
developed and its implementation will be based on four thrusts: (i) organization and operation of
the national army; (ii) reinforcement of operational capabilities of the armed forces; (iii) the
doctrine and implementation of a defense and security policy; and (iv) resource mobilization
strategy. Security will lead to the administration’s redeployment throughout the country and the
restoration of state authority, on the understanding that the return of decentralized authorities will
have to be accompanied by a policy of decentralization; a factor for social cohesion and peace.
2. Economic Recovery
14. To improve the population’s living conditions, three objectives are targeted: (i) public
finance consolidation; (ii) productive sector reforms; and (iii) international cooperation.
15. Economic recovery begins with better public finance management. This will include: (i)
consolidating public finances in order to create the best conditions for optimizing government
revenues; (ii) rigorously managing public expenditure; and (iii) allocating resources optimally in
order to stimulate economic development. In this regard, the reforms envisaged to increase internal
resource mobilization, public expenditure control - mainly the wage bill - will continue through
the implementation of financial services action plans and payroll reorganization. In addition,
attention will be paid to public procurement procedures.
16. The reform of the productive sector rests mainly on the strategic orientations of each
sector. These include: (i) revitalizing and modernizing the agro-pastoral sector; (ii) consolidating
the forest sector through the effective application of the forest code and the traceability of the
timber industry; (iii) reorganizing production in the extractive sector and updating its legal
framework; (iv) improving the rate of access to electricity and diversifying sources of production;
(v) large-scale revival of effective road maintenance works and implementing projects aimed at
modernizing the Bangui M'Poko Airport; (vi) improving road, river and air transport services for
both people and goods; and (vii) improving the business climate to promote investment and
business development.
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17. Within the framework of international cooperation and mobilization of external
resources, the government will negotiate with donors the formulation and adoption of new
cooperation programmes for the financing of development programmes and projects.
3. Politics and Good Governance
18. This priority stems from the recommendations of the Bangui forum held in May 2015
with the participation of all the social segments of the country. The actions therefore aim at: (i)
completing the implementation of resolutions adopted during the forum; (ii) restoring State
authority; (iii) developing trade with the outside world, as well as market mechanisms; and (iv)
establishing relations with emerging countries and the Arab world.
4. Social Affairs and Humanitarian Actions
19. Priority actions are part of the fight against the scourges that infringe human rights. To
this end, a set of actions will be implemented. These include: (i) protecting the rights of women
and children; (ii) developing humanitarian actions for the benefit of the people; (iii) establishing
Local Peace and Reconciliation Committees (LPRC) and the Truth, Justice, Reparation and
Reconciliation Commission; (iv) developing a sport that will contribute to peace, social cohesion
and coexistence; (v) establishing a policy to promote employment and vocational integration,
which is key to a fast return to social cohesion, stability, economic growth and lasting peace; (vi)
developing health infrastructure and combatting aids, the second leading cause of mortality after
malaria; (vii) raising the level of national education, one of the sectors deeply affected by recurrent
crises.
III. RECENT ECONOMIC DEVELOPMENTS AND MEDIUM-TERM PROSPECTS
20. The national economy is mainly based on the agro-pastoral sector, which accounts for
slightly more than 50% of the gross domestic product and employs more than 70% of the active
labour force. Confronted with enormous security constraints during the 2013 crisis, the economy
experienced a GDP contraction of 36.7% after a 4% growth in 2012. This was the consequence of
poor performance of all economic sectors, related to the massive destruction and plundering of
production tools, agricultural seeds and population displacement, particularly in agricultural and
rural areas. As a result, domestic revenues fell by more than half while foreign trade (net)
deteriorated drastically.
21. While the security situation remained globally unstable and volatile from 2013 to 2015,
the implementation of the Transitional Government's Roadmap and Emergency Programme for
Sustainable Recovery (PURD) led to the stabilization of macroeconomic aggregates. The
programme led to a gradual resumption of economic activities with real support from the
international community. Thus, there was economic recovery which translated to a real GDP
growth rate of 1% in 2014 and 4.8% in 2015. Inflation declined by 11.6% in 2014 to 4.5% in 2015.
This situation can be explained by the implementation of the government's economic and
budgetary policy and the support of development partners. These include the mobilization of
CFAF 74 billion budget support in 2014 and CFAF 42 billion in 2015. In terms of budget
execution, the fiscal pressure rate reached 7.1% of GDP in 2015 compared with 4.9 per cent in
2014. This improvement is linked to the substantial increase in the level of government revenues
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due to the authorities' determination to continue implementing reforms, despite the particularly
difficult security situation. Primary expenditure was contained at 10.1% of GDP, which reduced
the primary deficit to 3% of GDP in 2015. Public debt stood at 48.5% of GDP, compared to 51%
% in 2014.
22. The medium-term economic outlook has improved. They are based on the following
assumptions: (i) restoration of peace and security throughout the country; (ii) continuation of the
national reconciliation process and redeployment of the administration; and (iii) effective
implementation of the DDRR process. In addition to this, there is the lifting of the embargo on
diamond exports and the implementation of our economic, financial and administrative reform
programme. The implementation of a proper macro-economic and budgetary policy and our public
investment programme will enable the Government to: (i) restore the sustainability of public
finances; (ii) boost external debt sustainability; (iii) support competitiveness and broaden the bases
of economic activities; and (iv) create conditions for sustainable and inclusive growth, particularly
through the provision of public services. This process, supported by our technical and financial
partners, will help the administration’s capacity building efforts as well as the implementation of
public finance and good governance reforms, in particular, through greater transparency and
accountability. Thus, economic growth should average 5% over the 2016-2019 period. The
external current account deficit is expected to be about 9.7% of GDP due to significant
reconstruction requirements, while the financing requirement is expected to decline from 4.8% in
2016 to 3.2% in 2019. In line with the price stability context, inflation could gradually decelerate
as a result of the increase in agro-pastoral production to stabilize at 3% as from 2018, and in line
with the CEMAC convergence criterion. In terms of fiscal policy, we will pursue a viable policy,
while accumulating buffers to guard against potential shocks. The primary domestic deficit - which
will be the anchor of fiscal policy will be 3.3% in 2016 and will be gradually reduced to 0.9% of
GDP in 2019. This will reduce public debt.
IV. FINANCIAL AND ECONOMIC REFORMS
Financial Reforms
23. To improve our public finance management, we are implementing a five-thrust reform
plan from 2016 to 2018: (i) boosting revenues; (ii) securing and managing the State treasury; (iii)
facilitating and standardizing budget management; (iv) restore the true and fair view; and (v)
restore the State’s credibility. We commit ourselves to diligently implementing this reform plan as
well as the short- and medium-term action plans for the 2016-2018 period.
24. The review of the 2016 budget is the starting point for the reforms that will be pursued in
future Finance Laws. These reforms will make it possible to take into account new strategies
advocated in order to restore, in the medium-term, the viability of public finances and revive the
economy whose foundations were disrupted by the last crisis. From this perspective, the medium-
term outlook would lead to an increase in the mobilization of domestic revenues and the control
of public spending.
25. The Government will implement a policy aimed at combating corruption and fraud in all
its forms. In this context, it will ensure better use of public resources and strengthen good
governance through existing frameworks such as the Public Finance Monitoring and Management
Committee (PFMMC) and the Treasury Committee (TC) in which the Technical and Financial
Partners are represented to ensure co-management of both own resources and external aid
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resources. This is reflected in the strict application of the law requiring any person appointed to
the post of Minister to submit a declaration of assets before taking office. It also intends to set up
a Committee of Elders which will bring together elements that will help to prepare the conditions
for establishing a coherent anti-corruption framework in compliance with the international
provisions in force. The other good governance challenge will be the strengthening of oversight
institutions from 2016.
26. The pursuit of reforms to increase revenue mobilization is a Government priority. With
budgetary revenues of only 7% of GDP, we recognize that the state of public finances is
unsustainable because revenues are insufficient to cover our primary expenditures and honor our
debt commitments. Faced with this situation, we will implement the measures identified in our
action plan, prepared and adopted in 2016. The reforms aim at increasing domestic revenues from
7% of GDP in 2015 to 10.1% of GDP in 2016. The reforms will focus on:
• Strengthening the tax base and simplifying procedures. Several measures fall within
this framework. On the one hand, we will improve VAT management, including
through the prohibition of VAT collection at source as compensation for
government revenue. On the other hand, we will improve the bases for valuing
exports, strengthening controls and surveillance, particularly in the wood and
diamond sectors, as well as simplifying procedures and even reducing incidental
taxes. In this context, we intend to review the tax on the diamond industry,
strengthen control of the distribution system, reduce fraud and improve the
certification process. On petroleum taxation, we will adopt the decree reviewing the
structure of oil prices in order to include International Platts prices as a new basis
for calculation. In addition, with Bank support, we will carry out a census of
taxpayers and, by June 2017, will update the taxpayer's file in the new tax revenue
management information system. Similarly, several other measures will be
implemented. These include the updating and dissemination of the General Tax
Code, the opening of customs clearance offices and taxation departments that were
closed during the crisis. We will also check VAT-related fraud through at least five
joint controls conducted out each year by taxation and customs departments.
Improved tax and customs administration. We will continue to implement the measures with the
support of our technical and financial partners. The key elements of the reform will include a
review of the banking conventions to ensure better revenue collection, the conduct of a study to
identify small revenues, the implementation of the pre-filled declaration on property contributions,
and a review of the conventions on derogations. Other key aspects of the reform include the
harmonization of the General Tax Code through the implementation of the CEMAC VAT and
Excise Duty Directives; strengthening single global tax (SGT) control; strengthening the
management of tax operations of large corporations; setting up the corporate citizen status;
collection of arrears; and better taxpayer - public administration balance. Similarly, we will carry
out an integrated computerization of the customs and tax networks, starting with the Béloko
customs office, and later the link between Douala customs offices and Bangui. Lastly, we will
accentuate the controls carried out by the administration of financial departments. In this regard,
the Minister of Finance and Budget will adopt a decree introducing a risk management approach
and quarterly controls of management posts by the General Finance Inspectorate (IGF), requiring
that the main management positions be identified and at least monitored once per fiscal year.
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• Better management of exemptions in order to minimize them. It consists of a strict
application of the texts in force, no longer granting exceptional exemptions, setting
transparent and restrictive criteria relating to the granting of exemptions, and a re-
reading of the texts on the procedures for approving draft agreements with
exceptional exemptions. In this context, we are also undertaking to review the
conventions on waivers when they expire in order to reduce the level of exemptions.
27. There are many public finance management challenges. Thus, we commit ourselves to:
(i) fiscal discipline; (ii) restoring and standardizing the expenditure chain; (iii) continued efforts to
control the wage bill; and (iv) operationalizing the accounting function. The Government will
strengthen public finance governance through a return to normal budgetary procedures.
To meet the challenges of a simple, robust and transparent management of State credits and funds,
preparatory measures have been taken. These include launching commitments of the 2016 budget
and restoring the interconnections of the GESCO integrated budget management and accounting
system. The interconnection of the GESCO budget and GESCO accounting modules created the
conditions for restoring the expenditure chain. However, the connection between the budget and
accounting modules remains problematic, limiting the scope of the measure. With this in mind, we
will draw up, based on the findings of the audit of the GESCO application, the specifications for
implementing a new public finance management system. Other measures, such as operationalizing
the Central Accounts Treasury Agency (ACCT), have been fundamental steps in the public finance
reform process, essential steps towards greater transparency in public expenditure management.
To secure the management of the State Treasury and gradually extend the scope of the Treasury,
we will continue to align available resources with priority expenditures to ensure a solid
implementation of the treasury plan and to avoid the accumulation of arrears or outstanding
payments. In this context, we have prepared a monthly cash flow plan for 2016 and 2017.
Implementation will be monitored by the Treasury Committee which will continue to meet
monthly under the chairmanship of the Minister of Finance and Budget. Prior to these actions, the
expenditure execution procedures manual and the production of the budget preparation guide will
first be validated and, by June 2017, conduct a review of the texts relating to the appointment of
managers and credit administrators for better definition of the terms of their appointment and their
terms of reference. With regard to the social sectors whose implementation of the budget is
generally characterized by a low rate, recommendations have been made to set up procurement
commitment plans and a significant budget allocation for the implementation of their actions, in
particular, the strategy to assist women and girls who are victims of violence. Strategic actions will
include, among others, civil service reforms which have had the support of the World Bank and
the UNDP to clean up the civilian, gendarme and police personnel files. The Government wishes
to pursue its efforts to improve mastery of the wage bill.
28. To ensure better control of the payroll, which is a budgetary item, the Minister of Finance
and Budget will adopt a decree reviewing the timetable for the transmission of pay items on the
proposal of the ACCT in consultation with the IGF in order to promote the necessary monthly
checks. The objective of this measure is that a minimum of 50% of payroll is controlled by ACCT.
Finally, to ensure better payroll control, we are committed to making available the pay table, the
key work tool for the processing of salaries.
• The government intends to continue and accelerate the implementation of measures
to strengthen public financial management. These measures covering the 2016-18
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period are organized around four priority objectives: (i) securing and managing the
State treasury to gradually extend the scope of the Treasury; (ii) unblocking and
standardizing budgetary management with a view to gradually reducing the amount
for exceptional expenditure to 5%; (iii) restoring the true and fair view of the entire
general budget and related budgets; and (iv) re-establishing the credibility of the
State by fighting fraud and restoring creditors’ confidence.
• The Government also intends to: (i) adopt the nomenclature of the supporting
documents of the expenditure governing the interactions between authorizing
officers and accountants by a decree of the Minister of Finance and Budget; (ii)
adopt by decree of the Minister of Finance and Budget the expenditure procedures
manual; (iii) secure and strengthen Treasury management through the extension of
the scope of the State's operations and identification of all state bank accounts in
commercial banks; (iv) restore the expenditure chain; (v) strictly restrict the use of
exceptional procedures (budget payment orders and cash payment orders) to a
maximum of 5% of total expenditure, excluding salaries; (vi) restore normal budget
expenditure (commitment / liquidation / scheduling / payment) procedures,
including a strengthened Single Treasury Account (to include all revenue recovered
by sector ministries, commercial banks, government agencies and petroleum
products distribution sector), a working ACCT and activation of the budgetary and
accounting modules of the GESCO computer system in support of public finance
management. We also plan to consolidate the single treasury account by closing all
Government accounts with commercial banks, with the exception of project
accounts while preserving the stability of the banking system.
29. The domestic payments arrears clearance is at the heart of our fiscal consolidation
programme and restoration of creditors’ confidence. The CAR signed a commitments
consolidation agreement under the consolidated and unpaid credits to BEAC for arrears of CFAF
55 billion owed to BEAC. The on-going audit of commercial bank claims on the state, audits in
other sectors such as cotton and forestry and the audit of our commercial, social and other debts
which we intend to clear with the support of our technical and financial partners will serve as the
basis for preparing and adopting a settlement plan by 30 June 2017. We intend to explore, in
collaboration with the staff of the IMF and the World Bank, the possibility of securing these bank
loans. We also intend to carry out an evaluation of VAT credits in order to prepare a settlement
plan and eliminate any recourse to clearing operations. In the immediate future, priority will be
given to the outstanding payments of suppliers in 2015 and 2016, followed by the 2013-14
commercial arrears, salaries and pensions estimated at CFAF 13.2 billion, which will be cleared
in 2016 and 2017 respectively.
30. We will strengthen debt management. To mitigate debt distress risk in external debt
caused by the collapse of tax revenues and exports, the government will seek, as a priority, to
mobilize funding in form of grants, in consultation with IMF staff, through concessional loans,
having a grant element of 50 percent. It will also pursue efforts to improve public debt management
through training and by installing the new DMFAS 6.0 debt management and analysis software.
IX
Economic recovery
31. The CAR has just emerged from the emergency phase and has to move towards the
reconstruction of its economy. To this end, it chooses to define and implement development
strategies based on its economic potential. The government's challenge is to simultaneously create
a supportive business environment for the private sector and provide support to businesses affected
by the 2013 crisis in order to reduce poverty, promote the resumption of economic activities and
support the competitiveness of the national economy. The policies should foster sustained,
sustainable, inclusive and job-creating growth, especially for young and disadvantaged people.
32. To make the most of the economic recovery, reforms are needed to stimulate growth and
promote formalization in employment-intensive sectors such as agriculture, especially the cotton
and farming sectors. New jobs with obvious income-generating potential will help provide
opportunities for young workers and, in particular, veterans and victims of violence, for economic
progress through peaceful means, which will reduce incentives to seek income through crime and
conflict. At the same time, the revival of agriculture and the forestry sector will depend on
investment in the transport sector, especially the maintenance of secondary and rural roads that are
essential to link producers to markets. One of the areas for improvement for growth potential is
the development of the Information and Communication Technology (ICTs) sector to enable
greater connectivity - in particular, access to voice, text, and mobile payments, across the country
and abroad.
33. Beyond these aspects, the Government has not lost sight of the business environment
improvement actions. In view of CAR's position in the Doing Business ranking, and having made
operational the Joint Climate Change Framework for Business Climate Improvement (CMCAA)
whose overriding objective is to improve dialogue with the private sector, the implementation of
several actions identified within the framework of the recommendations made during the seminar
organized by the National Credit Council in March 2015 is under way. Among these are the
evaluation of the losses incurred by companies during the 2003 events and the feasibility study for
the creation of a national guarantee and private sector support fund, for which the support of the
partners is required to conduct and strengthen economic activities.
34. As a fundamental pillar of the Central African economy, the agro-pastoral sector accounts
for about 50% of GDP and over 70% of jobs. This sector which was weakened during the 2013
crisis, as a result of the constant looting and destruction of production tools at all levels, including
in the agricultural sector, therefore faces crucial challenges. Marginal productivity is low and has
essentially stagnated over time. Agricultural systems, which are for the most part small in size, are
still mainly subsistence-oriented and largely dependent on climatic conditions. The country's
irrigation potential remains largely underdeveloped. Most farmers produce mainly food crops
using traditional methods. Commercial agriculture is a marginal component of the sector, and the
use of modern technologies and improved inputs is very limited. Public and private institutions,
which are decisive in supporting a strong agricultural sector, are either weak or absent. Many years
of under-funding and political instability have eroded the country's agricultural research and
extension services. Many producers lack technical knowledge. In addition, the reduced size and
scope of agricultural markets and input distribution systems limit the availability of high-quality
seeds and fertilizers, improved animal species, veterinary supplies, agricultural tools and
equipment. In 2015, the authorities adopted a law on seeds, the implementing decrees of which
have not yet been signed, has delayed its implementation. In addition, the ability of producers to
X
acquire improved inputs or to invest in physical capital is compromised by insufficient access to
credit, as CAR has serious deficiencies in rural financial infrastructure. Access to external markets
is also underdeveloped because of the high cost of transporting products on rural roads in poor
conditions and lack of maintenance. This, in turn, reduces the opportunities for and
competitiveness of producers and, in so doing, undermines initiatives that may be aimed at
increasing and / or diversifying agricultural production.
35. To this end, the government's response is reflected in the definition of a four-pronged
strategy: (i) sustainable revitalization of the agro-pastoral sector and economic development; (ii)
agriculture as a factor in national reconciliation; (iii) increase the professional integration of young
people in the modernization of agriculture; and (iv) improve agricultural governance and
competitiveness. Hence, PNIASAN, a tool for mobilizing resources to finance agro-pastoral
projects. We will commit to updating this document, taking into account the current agricultural
sector context and the vision of the government's agenda. Its implementation will be followed by
other concrete actions to revitalize the agricultural sector.
36. The forest sector entered the regulatory phase with the adoption of a law creating the
Forest Code in October 2010 in order to regulate its exploitation. To ensure transparency in the
sector, the authorities adopted a strategy for the implementation of the FLEGT process developed
by the European Union by signing a Voluntary Partnership Agreement with that institution in 2010.
However, the implementation has witnessed some delays due to the 2013 crisis that greatly
affected the sector, exacerbating the difficulties it faced, such as the low 70% wood processing
required by the Code. There is significant demand for tropical wood products on international
markets, and CAR’s wood remains competitive despite high transport costs. Prior to the 2013
crisis, the forest sector accounted for more than 6% of GDP, about half of total exports and about
10% of state revenues. The sector also creates significant number of jobs, especially in the
provinces. Before the crisis, the sector accounted for about 4,000 direct jobs and 6,000 indirect
jobs. The forest sector has a very strong legal and regulatory framework and meets international
standards. Finally, the country has actively participated in international certification schemes and
multilateral efforts to combat climate change.
37. Despite these positive measures, the crisis has largely halted activities in the forest sector.
Almost all forestry companies have suspended operations, and most have suffered a significant
amount of damage. The forest road network, for example, has been severely degraded and forestry
companies do not always have the means to restore it. The issue of tax arrears hampers the sector’s
development. Only 5 of the 14 logging companies are currently active. The search for solutions
concerning tax arrears and the reassignment, under transparent conditions, of inactive concessions
to new investors will therefore be decisive for this sector’s positive development in the future.
38. Strengthening governance, operations and the financial health of the Road Maintenance
Fund (FER) and the National Equipment Office (ONM) is imperative to ensure the effective
maintenance of our road network in order to restore the smooth flow of goods and people; that
automatically becomes a prerequisite for the economy’s rapid recovery. Our transport
infrastructure and services need large-scale investments to move towards the quality and efficiency
needed to revitalize our economy. In the immediate future, the sector's priority is: (i) to establish
an efficient road maintenance programming and enforcement system to protect existing
infrastructure; and (ii) to ensure the sustainability of future investments, including through
increased resources for road maintenance. This requires a significant improvement in road
XI
maintenance governance in order to establish the conditions for sustainable and efficient road
maintenance with a view to attracting the necessary investment in this sector.
39. To meet these challenges, the Government intends to take a number of measures aimed
at boosting the agricultural, forestry and transport sectors. Thus, with a view to improving transport
sector governance, the Government has adopted the Road Maintenance Fund (FER) Operations
Manual which defines, in particular, the scheduling of maintenance works (on-site or off-site); the
definition of road works eligible for FER funding; and the formalization of contractual relations
between the National Equipment Office (ONM), the Ministry and the FER. In direct support of
the agricultural sector, the Government will adopt the texts relating to the operationalization of the
Seed Code.
40. Pending the adoption of the input code, the Government commits to adopting an
interministerial decree in 2017 on temporary arrangements for the importation and distribution of
inputs (fertilizers, plant protection products and veterinary products). To strengthen the transport
sector governance reforms, we commit to conducting an audit of the road maintenance fund,
including an inventory of debts between the FER and the ONM and a plan for the clearance of
these debts. To stimulate the forestry sector’s development, the government undertakes to conduct
a technical and financial audit of forestry companies that do not implement their management plan.
On the basis of this audit, in strict compliance with the legislation in force and by adopting a
participatory and transparent approach, the government will take corrective action on inactive
concessions, including the cancellation of concessions and the granting of concessions to new
investors.
41. The Central African Republic (CAR) has a legal and regulatory framework for obsolete
information and communication technologies (ICTs) and the public institutions responsible for
governing the sector do not have the capacity to fulfill their mandate. Limited international
connectivity leads to high prices and insufficient available bandwidth. Mobile phone services
dominate the ICT sector, but prices remain high and service quality is poor. The national fixed
telephone service suffers from serious technical and financial issues. Despite the strong
competition between operators in the mobile telecommunications market, coverage remains very
limited, especially in remote rural areas. This is due both to the low profitability of the services
offered in a low-consumption market and the negative impact of security instability on
infrastructure development and maintenance. To promote the development of the
telecommunication sector which is of particular importance and rapidly requires an increase in the
population's access to networks, the Government will implement reforms to promote it. The
government will then have the draft law on electronic communications adopted by the Council of
Ministers and send the draft law to the National Assembly before the end of 2016. The government
will continue with reforms in the sector in 2017 through the following measures: (i)
operationalizing a traffic control system by the Telecommunications Regulatory Authority (ART);
and (ii) adopting a law to operationalize the universal service fund by the Council of Ministers in
order to: (a) extend the geographical coverage of mobile networks in low income rural areas; and
(b) promote the development of community ICT centres in targeted rural communities.
V. RECOVERY AND PEACEBUILDING PLAN
42. On the basis of the Prime Minister's four-priority programme submitted to the National
Assembly in June 2016, the Government, with the support of the international community,
XII
conducted an assessment of the needs of the population through a popular consultative process in
order to develop its five-year plan to promote recovery and peacebuilding in CAR. This plan
identifies actions to be taken over the next five years (2017-2021). The implementation of the
Recovery and Peacebuilding Plan in CAR (PRCPCA) is based on four main principles. This
approach focuses on regional growth clusters, economic integration and diversification, the
development of labor-intensive activities, and the social resilience of the population.
43. RCPCA actions are grouped into three pillars. The first pillar aims to restore peace,
security and reconciliation, which are fundamental to the country’s recovery and normalization.
This pillar comprises strategic thrusts whose implementation is spread out over the implementation
period. These include: (i) support for the reduction of violence through disarmament and the
reintegration of ex-combatants and children associated with armed groups; (ii) promotion of
stability through security sector reforms; (iii) reform of the judicial institution and promotion of
the end of impunity; (iv) facilitation of reconciliation and social cohesion, as well as the
establishment of conditions for the return of refugees and sustainable solutions for displaced
persons. The second pillar relates to the renewal of the social contract between the State and the
population. Through this pillar, the State should strengthen its presence throughout the national
territory and develop its capacity to provide basic social services such as education, health, water
and sanitation. It should also ensure food security and resilience of the population, as well as good
governance, including macroeconomic stability, public finance management and control, and the
fight against corruption. Lastly, the last pillar is devoted to economic recovery and the
revitalization of the productive sectors. Its implementation will provide the population with
income-generating activities and employment opportunities in the major productive sectors. It is
also focused on improving the business climate and promoting investment.
44. The RCPCA thus designed served as a negotiation medium at the Brussels donors'
conference on 17 November 2016. For a total cost of US$ 3.161 billion, US$ 1.684 billion of
which was used in the first three years, the government has recorded, at the end of negotiations,
an announcement of US$ 2.268 billion corresponding to CFAF 1,130 billion. In accordance with
the mutual commitment framework between the State and the international community based on
aid effectiveness principles, the President of the Republic issued a decree setting up an operational
institutional framework for the coordination, monitoring and implementation of this plan. This
framework should focus on strengthening the absorptive capacities of the different implementation
structures of the plan while ensuring a combination of the disbursement procedures of the
resources dedicated to financing the actions identified in each area.
45. Moreover, at the Government’s request, the African Development Bank has carried out
an audit of the budget support file for the 2016 to 2017 financial years. This dossier, which is
currently being finalized, will enable the Government to mobilize resources, part of which will be
allocated to post-round-table activities within the limits of the provisions of the above-mentioned
decree stipulated in Article 13.
VI. INSTITUTIONAL FRAMEWORK FOR THE IMPLEMENTATION OF THE
PROGRAMME
46. The Economic and Financial Reforms Monitoring Unit (CS-REF) is responsible for the
monitoring of PAREF. The technical framework for monitoring and evaluating the various
measures defined within the framework of the programme will be the ideal implementation
XIII
framework. It comprises the designation of those responsible for implementing the measures.
These focal points will monitor PAREF’s implementation at the level of the CS-REF. The CS-
REF will also organize regular meetings with key reforms stakeholders to assess the
implementation status.
Minister of the Economy, Planning and Cooperation
Félix MOLOUA
XIV
ANNEX 2 – Conditions for Use of General Budget Support
Conditions Assessment of the fulfilment of conditions
Government’s
commitment to
reduce poverty
While waiting for the preparation of the new national development strategy, the new
government has defined the country’s priorities through Government’s General Policy
Statement. Government’s programme priorities are divided into 4 strategic thrusts: 1- peace,
security and social cohesion; 2- economic recovery; 3- policy and good governance; and 4-
social affairs and humanitarian action.
Macroeconomic
stability
The country’s economic situation, which had been severely affected by the crisis, improved
considerably in 2014 and 2015. The real GDP growth rate rose to 4.8% in 2015 against 1%
in 2014 and inflation dropped significantly from 9.7% in 2014 to 4.8% in 2015. At the level
of public finances, government improved resource mobilisation and contained the level of
expenditure, especially the payroll. Domestic revenue, which had dropped by half between
2012 and 2013, started rising gradually. In 2015, domestic revenue reached 7.1% of GDP
against 5.6 and 4.9% respectively in 2013 and 2014. The basic primary deficit rose from -
5.1% of GDP in 2014 to -3% of GDP in 2015. The public debt is estimated at 48% of GDP
in 2015, a slight decrease relative to the 2014 level (51.1% of GDP). With the support of
TFPs and the IMF under the ECF-supported reform programme, efforts will continue to
maintain the macroeconomic framework.
Fiduciary risk
assessment
The country’s fiduciary framework remains fragile, due to the weaknesses noted in public
finance management. The computerized public finance management system (GESCO) is
dysfunctional, with the excessive use of exceptional public expenditure procedures, the
generalization of public contracts awarded by direct negotiation and the delay in producing
public accounts and settlement laws. Government and TFPs, engaged in budget support,
have agreed on a minimum platform to ensure transparency in public finance management,
focused on the preparation and monitoring of a cash flow plan with the strong involvement
of the Central Treasury Accounting Agency. Measures are underway to make GESCO fully
operational, reduce the use of waivers for expenditure execution; streamline and consolidate
the public service database, reduce contracts awarded by direct negotiation, carry out public
procurement audits and address public accounts backlog. These measures will gradually
reduce fiduciary risks.
Political
stability
The socio-political situation has improved considerably with the return of constitutional
order in 2016 following the election of the new Head of State. Security has also improved
since the social dialogue organised in 2015 before the elections. Government intends to
accelerate DDRR implementation to consolidate the security climate.
Harmonisation Before the March 2013 crisis, a general budget support framework (GBSF) and a Protocol
Agreement signed with all parties in December 2010 defined the framework for donor
intervention in CAR. Although no longer operational since the crisis, TFPs engaged in
budget support consult regularly to conduct joint missions in CAR, under the leadership of
the IMF. Furthermore, UNDP organises regular meetings with TFPs to discuss security and
humanitarian issues and harmonise the various interventions. This operation was prepared
during a joint mission in CAR in May 2015, with the IMF, World Bank, European Union
and France.
XV
ANNEX 3 – Matrix of Programme Measures
Measures Responsible structures Implementation date
2016 2017
I. Improvement of tax revenue mobilisation and public expenditure management
1.1 Improvement of tax revenue
1.1.1 Produce a report on the review of exemption
agreements effective as at 30 August 2016, showing
exceptional exemptions (Prerequisite)
Ministry of Finance
(Department of Legal
Affairs)
September
2016
1.1.2 Review instruments on the terms of approving draft
agreements on exceptional exemptions (indicative
trigger)
Ministry of Finance
(Department of Legal
Affairs)
June 2017
1.1.2 Census of taxpayers and updating of the taxpayers’
database in the new tax revenue management
information system (indicative trigger)
General Directorate of
Taxation June 2017
1.1.2 Updating and dissemination of the General Tax Code
(CGI)
General Directorate of
Taxation
December
2016
1.1.4 Interconnection of Central African customs services
with those in Douala
General Directorate of
Customs
December
2017
1.1.5 Measures to fight VAT fraud (joint controls with
customs services based on the crossed risks) – at least 5
controls per year
General Directorate of
Taxation / General
Directorate of Customs
2016 2017
1.1.6 Harmonise the CGI with the CEMAC Directive on
excise duties (Taxation on mobile telephony)
General Directorate of
Taxation
December
2017
1.1.7 Revise the agreements on exemption measures when
they expire in order to reduce level of exemptions –
indicative trigger
Ministry of Finance –
Inter-Ministerial
Committee on
Exemptions
June 2017
1.1.8 Reopen customs clearance offices and taxation offices
that were closed during the crisis
General Directorate of
Customs/General
Directorate of Taxation
December
2017
1.2 Improvement of budget execution
1.2.1 Validation of the expenditure execution procedures
manual (trigger 2017) and development of a budget
preparation guide - Prerequisite
General Directorate of
Budget
September
2016 June 2017
1.2.2 Review of instruments on the appointment of credit
managers and administrators for better definition of
the terms of their appointment and their duties –
indicative trigger
General Directorate of
Budget June 2017
1.2.3 Prepare procurement expenditure commitment plans for
all ministries, particularly the Ministries in charge of
health, education and social affairs
DG
Budget/DGMP/Sector
ministries
2017
1.2.4 Abolish imprest funds for missions (excluding imprest
funds for the Presidency and the Prime Minister’s
Office)
DG Treasury 2016 2017
1.2.5 Prepare specifications for the establishment of a new
public finance management system taking into
account the findings of the GESCO software audit
Department of IT
Services of the Ministry
of Finance and Budget
December
2017
1.2.6 Audit public contracts from 2012 to 2015 ARMP June 2017
1.2.7 Operationalise the Conflict Resolution Committee ARMP December
2017
1.2.8 Budgetary allocation to strengthen public services in
charge of health and school equipment and supplies as
well as the national health information system
Ministries in charge of
education, health and
social affairs
2017
XVI
Measures Responsible structures Implementation date
2016 2017
1.2.9 Budgetary allocation for the implementation of the
training and recruitment plan for the additional
workforce of the education and health sectors and
their deployment taking regional balance into account
Ministries in charge of
education, health and
social affairs
2017
1.2.10 Increase the budget execution rate (excluding salaries)
of the education, health and social affairs sectors
Ministries in charge of
education, health and
social affairs
2016 2017
1.2.11 Budgetary allocation for the implementation of the
assistance strategy for women and girls who are
victims of violence
Ministry of Finance,
Ministry of Social
Affairs
2017
II. Improvement of the business environment and governance in productive sectors
2.1 Improvement of the business environment and support to SMEs
2.1.1 Assessment of losses suffered by enterprises during
the 2013 events (Prerequisite)
September
2016
2.1.2 Audit the State’s arrears/liabilities for the period 2012-
2014 Ministry of Finance
December
2016
2.1.3 Adoption of a clearance plan for arrears and
liabilities (indicative trigger) Ministry of Finance June 2017
2.1.4 Adoption of private sector support measures in relation
to losses suffered during the 2013 events Ministry of Finance June 2017
2.1.5 Establishment of the National Private Sector Guarantee
and Support Fund - operationalise by June 2017 the national
committee responsible for monitoring the implementation of
Funds and organise by December 2017 a roundtable to
mobilise resources for its capital
Ministry of Planning;
Ministry of Trade 2017
2.1.7 Finalization of the study for the creation of an approved
management centre within the Chamber of Commerce,
Industry, Mines and Crafts (CCIMA)
Ministry of Trade;
CMCAA
December
2016
2.1.8 Operationalisation of the CGA in Bangui Ministry of Trade;
CMCAA
December
2017
2.1.9 GUFE - Establishment of GUFE’s financial
management system GUFE
December
2016
2.1.10 Proposal of a reform of GUFE’s status to strengthen its
management autonomy
December
2017
2.2 Revival of productive sectors
2.2.1 Continued implementation of Kimberley Process
measures to ensure production and export compliance by at
least 10 diamond producing areas
Ministry in charge of
mines
December
2017
2.2.2 Revision of the Mining Code Ministry in charge of
mines
December
2017
2.2.3 Partial clearance of cotton sector arrears in 2016 and
total clearance in 2017 (indicative trigger)
Ministry of Rural
Development
December
2016 June 2017
2.2.4 Increase by at least 20% the number of rural sector
supervisors in the various regions of the country
Ministry of Rural
Development 2017
2.2.5 Publication of the agro-pastoral land code Ministry of Rural
Development 2017
2.2.6 Adoption of the decree on the organisation of the
profession of agricultural adviser
Ministry of Agriculture
and Rural Development 2017
2.2.7 Updating of the PNIASAN (prerequisite) Ministry of Agriculture
and Rural Development
September
2016
2.2.8 Adoption of a decree on the organisation and operation
of the Central African Agency for Food Health Security
Ministry of Agriculture
and Rural Development 2017
XVII
Measures Responsible structures Implementation date
2016 2017
2.2.9 Approval of organic instruments of the Ministries of
Agriculture and Rural Development, Livestock and Animal
Health, Environment and Sustainable Development, and
Water Resources, Forestry, Hunting and Fisheries;
Ministry of Agriculture
and Rural Development;
Ministry of Livestock
and Animal Health;
Ministries of
Environment and
Sustainable
Development, and Water
Resources, Forestry,
Hunting and Fisheries;
2016
2.2.10 Publication of the law on agricultural professional
organisations
Ministry of Agriculture
and Rural Development 2017
2.2.11 Adoption of enabling decrees of the 2001 law on the
establishment and code of ethics of the National Association
of Veterinary Doctors
Ministry of Livestock
and Animal Health; 2016
2.2.12 Establishment of a committee in charge of
coordination and monitoring and evaluation of regional
agricultural development programmes (2016)
Ministry of Agriculture
and Rural Development 2016
2.2.13 Finalization of the forestry policy
Ministry of Water
Resources, Forestry,
Hunting and Fisheries
December
2016
2.2.14 Adoption of a decree on the enabling instruments of
the Environmental Code (trigger)
Ministry of Water
Resources, Forestry,
Hunting and Fisheries
June 2017
2.2.14 Conduct a study on forestry taxation and para-taxation
to make the sector competitive
DGI / Ministry of Water
Resources, Forestry,
Hunting and Fisheries
December
2017
XVIII
ANNEX 4 – Relations between CAR and the IMF
IMF Executive Board Approves Three-Year US$115.8 Million Arrangement under the ECF for the
Central African Republic on 20 July 2016
On July 20, the Executive Board of the International Monetary Fund (IMF) approved a three-year SDR 83.55 million
(about US$115.8 million, 75 percent of quota) arrangement under the Extended Credit Facility (ECF) for the Central
African Republic. The approval enables the immediate disbursement of SDR 12.525 million (about US$17.4 million),
while the remaining amount will be phased over the duration of the arrangement, subject to program reviews.
The authorities’ ECF-supported program aims to entrench macroeconomic stability and create the conditions for
sustained and inclusive growth, through structural reforms.
Following the Executive Board’s discussion on the Central African Republic, Mr. Mitsuhiro Furusawa, Deputy
Managing Director, and Acting Chair, made the following statement:
“The return to democratic institutions in April 2016 offers the Central African Republic a unique opportunity to
consolidate peace, foster inclusive economic growth, and rebuild national cohesion to exit the current state of fragility.
Going forward, and building upon progress made during the transition, economic reforms and consolidation of peace
should ensure lasting improvements in security conditions and economic development of the country.
“The new three-year program supported by the Extended Credit Facility seeks to restore macroeconomic stability
through lowering the domestic primary deficit in order to restore debt sustainability, while ramping up poverty-
reducing spending and critical capital investment. Donor support ensures the full financing of the first year of the
program, and there are good prospects for financing the remainder of the program.
“The program’s structural reform agenda focuses on raising domestic revenue to bring it to the pre-crisis level through
a review of tax policy, strengthening tax administration, and streamlining tax exemptions. Raising domestic resource
mobilisation to the country’s potential over the medium term will be key to allow the government to scale up pro-poor
and investment spending. Structural reforms also focus on strengthening public financial management, improving the
efficiency of spending, and restoring control and transparency in the execution of the budget. Better control of the
wage bill would allow new hiring in the priority health and education sectors. In addition, the authorities’ structural
reform agenda also comprises measures to increase banking intermediation, improve the business environment, and
build institutional capacity. Technical assistance to strengthen capacity development is a critical element of the
program and the authorities have agreed to participate in the pilot IMF Capacity Building Framework.”
Annex
Recent Economic Developments
The 2013 crises and a protracted political transition in 2014–15 provide the context for recent economic developments.
The economy contracted by an estimated 36.7 percent in 2013, and economic growth remained anaemic in the
subsequent years, due to structural rigidities, poor infrastructure and limited energy supply. Inflation reached 11.6
percent in 2014, and receded to 4.5 percent in 2015 thanks to improved supply conditions and a fall in the prices of
basic imports. During this period, the fiscal deficit widened on the back of declining domestic revenue, which
collapsed to below 5 percent of GDP in 2014. Corrective measures implemented in 2015 allowed revenue to reach 7.1
percent. However, domestic revenue remains insufficient to cover salary payments and critical expenditure. The
current account deficit has doubled to 9 percent of GDP, mainly reflecting a collapse in exports of diamonds and
forestry products.
Program Summary
The government program, supported by the ECF, aims at restoring macroeconomic stability, economic growth, job
creation and poverty reduction. The program focuses on enhancing revenue mobilisation and improving expenditure
efficiency to lower the primary fiscal deficit and scale-up social and infrastructure spending. Measures to improve the
business environment and access to credit should support private sector activity. Technical assistance and training will
be critical to support the implementation of key reforms that will underpin an economic recovery.
XIX
ANNEX 5 – Key Macroeconomic Indicators
CAF
Indicators Unit 2000 2011 2012 2013 2014 2015 (e) 2016 (p)
National Accounts
GNI at Current Prices Million US $ 932 2 175 2 217 1 460 1 585 ... ...
GNI per Capita US$ 250 480 480 310 330 ... ...
GDP at Current Prices Million US $ 960 2 196 2 170 1 538 1 723 1 614 1 746
GDP at 2000 Constant prices Million US $ 960 1 146 1 193 762 770 801 842
Real GDP Growth Rate % 1,9 3,3 4,1 -36,1 1,0 4,1 5,2
Real per Capita GDP Growth Rate % -0,1 1,3 2,1 -37,3 -1,0 2,0 3,1
Gross Domestic Investment % GDP 9,5 12,2 15,0 8,7 10,2 9,8 9,9
Public Investment % GDP 4,7 4,0 6,2 1,7 2,1 2,1 2,2
Private Investment % GDP 4,8 8,2 8,8 7,0 8,1 7,7 7,8
Gross National Savings % GDP 8,9 3,9 9,9 3,2 -0,6 -2,6 2,1
Prices and Money
Inflation (CPI) % 3,2 1,2 5,9 6,6 11,6 5,6 4,7
Exchange Rate (Annual Average) local currency/US$ 712,0 471,9 510,5 494,0 494,4 591,4 603,1
Monetary Growth (M2) % 2,4 16,3 1,0 6,6 13,5 14,0 ...
Money and Quasi Money as % of GDP % 16,2 23,1 21,8 33,9 34,3 34,9 ...
Government Finance
Total Revenue and Grants % GDP 14,3 13,3 16,4 8,4 15,7 11,2 12,6
Total Expenditure and Net Lending % GDP 16,2 15,7 16,4 14,7 12,5 14,5 15,4
Overall Deficit (-) / Surplus (+) % GDP -1,8 -2,4 0,0 -6,3 3,2 -3,2 -2,8
External Sector
Exports Volume Growth (Goods) % 17,6 4,1 11,3 -50,8 -40,3 19,7 42,8
Imports Volume Growth (Goods) % -5,2 -8,1 23,3 -29,3 76,3 8,4 17,5
Terms of Trade Growth % -2,9 284,5 -18,3 14,2 20,0 -14,9 -4,5
Current Account Balance Million US $ -13 -166 -100 -46 -105 -185 -89
Current Account Balance % GDP -1,3 -7,6 -4,6 -3,0 -6,1 -11,5 -5,1
External Reserves months of imports 6,9 3,5 3,7 6,1 4,9 4,9 ...
Debt and Financial Flows
Debt Service % exports 18,8 3,7 9,1 9,1 7,8 9,2 10,4
External Debt % GDP 87,0 18,3 20,7 34,4 28,5 27,5 26,4
Net Total Financial Flows Million US $ 50 289 229 229 642 ... ...
Net Official Development Assistance Million US $ ... 269 227 202 610 ... ...
Net Foreign Direct Investment Million US $ 1 37 70 2 3 ... ...
Source : AfDB Statistics Department; IMF: World Economic Outlook, October 2015 and International Financial Statistics, October 2015;
AfDB Statistics Department: Development Data Portal Database, March 2016. United Nations: OECD, Reporting System Division.
Notes: … Data Not Available ( e ) Estimations ( p ) Projections Last Update: April 2016
Central African RepublicSelected Macroeconomic Indicators
-40,0
-30,0
-20,0
-10,0
0,0
10,0
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
%
Real GDP Growth Rate, 2004-2016
-4
-2
0
2
4
6
8
10
12
14
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Inflation (CPI),
2004-2016
-14,0
-12,0
-10,0
-8,0
-6,0
-4,0
-2,0
0,0
2 004
2 005
2 006
2 007
2 008
2 009
2 010
2 011
2 012
2 013
2 014
2 015
2 016
Current Account Balance as % of GDP,
2004-2016
XX
ANNEX 6 – Donor Interventions in CAR
Donor Project General
support
Sector
support Scope Observations
World
Bank
Education project X Construction and rehabilitation of classrooms. Improvement of learning and teaching quality
conditions
These two operations cover the social sectors in infrastructure rehabilitation and
the provision of emergency healthcare to
the population. These support operations are complementary to PUASCRE, which
supports the redeployment of teachers and
health personnel
Health project X Emergency healthcare
Institutional support to the Ministry of Health
FCP project in
public finance
management
X
Improvement of revenue collection and
budget preparation and execution procedures; improvement of State and public
administration presence The WB provides for budget support of
USD 50 million in 2016 and 2017 to finance PACE Emergency public
service restoration
project
X X
Payment of salaries and technical assistance
to the Ministry of Finance
United
Nations
UN peace
consolidation fund X
Emergency palliative measure to finance the
police and gendarmerie forces
UN support is complementary to that of other TFPs to take into account both the
general administration and the armed forces
IMF Budget support
X
Budget support through the Extended Credit Facility; the ECF-supported government
programme aims to restore macroeconomic stability, growth, job creation and poverty
reduction. It focuses on better revenue
mobilisation and greater expenditure efficiency in order to reduce the primary
budget deficit and increase social and
infrastructure expenditure
Programme measures are also supported by
the World Bank, EU, France and AfDB
(PAREF)
France Budget support / Technical
assistance
X
X
Budget support to the tune of USD 6 million; disbursed before June 2014 at the latest.
French technical assistance seeks to
strengthen the technical capacities of the
customs service and the Department of Public
Accounting
French budget support aims to help the
country meet its external commitments in relation to multilateral creditors. The
technical assistance component concerns
public finance management
EU Budget support and technical assistance
X X
Technical assistance targets public finance
structures TA to the CS-REF ; TA to the public finance
reform plan
TA to ACCT; TA to the customs service (SYDONIA, Petroleum taxation, Surveillance
Brigade)
The EU plans budget support during the
2017-2019 period
AfDB
Budget support
X
Budget support operation. Support for the
redeployment of the administration, improvement of tax revenue, public finance
management and economic recovery
Coordination is ensured by the IMF, WB, EU and France, which also support public
finance management structures. The Bank
intervenes in equipment and the provision of experts in various fields.
PFM and private sector technical
assistance
(PARCGEF)
X
Technical assistance to several departments on the expenditure chain (Taxation, Customs,
Treasury, Budget, Chambers of Commerce,
One-Stop-Shop for Business Formalities…)
Source: Roundtable of Donors and Central African authorities
XXI
ANNEXE7 – Fiduciary Framework-Related Measures during the Exceptional Crisis
Period
Element Assessment of
initial risk Main inadequacies Mitigation measures
1. Budgeting High
Absence of a system making it
possible to have reliable information
on the budget management of
projects and programmes financed by
external partners
Include project and programme budgets in
the budget management system in order to
ensure permanent and efficient monitoring
and control of the said budgets up to the
component level.
Harmonise the project budget schedule with
that of the State.
Harmonise budget classifications of the
projects and programmes of various donors
and then link them to the national budget
classification system.
2. Cash
High
Absence of formal procedures for cash
management,
Low cash flow control (unreliable cash
flow forecasts and disbursements) ;
Weak control over the management of
arrears and debt in general
Speed up the implementation of the
procedures manual
Improve the quality of the cash flow plan
3. Accounting
and
production
of financial
reports
High
Inefficient computerized accounting
system
Absence of procedures for the
recording of project operations
financed with external funds
Delay in the production of financial
statements
Establish a more efficient integrated PFM
system following precise specifications
Strengthen the technical capacities of human
resources;
Define a mechanism for recording project
operations financed by external donors
4. Internal
Audit
High
Inadequacy of human resources;
Low IGF capacities;
Absence of the code of conduct in the
administration ;
Procedures manuals ignored and ill-
adapted to the current context;
Inadequacy in the application of
procedures, including asset
safeguarding; inadequacy in
expenditure control
Prepare or update the procedures manual on
control according to internationally accepted
control standards
Strengthen IGF capacities, following a
general training plan;
Define a code of conduct and disseminate it;
Establish a mechanism to monitor the
recommendations of IGF missions.
5. External
audit
High
Low autonomy of the CdC,
considerably limiting its
independence
Limited knowledge of the CdC’s
mission by the administration and
citizens
Insufficient qualified personnel and
application of internationally
accepted standards
Inadequacy of financial resources
Absence of formal procedures
Provide the CdC with the necessary means to
effectively ensure its mission ;
Update the CdC’s organic instruments in order
to strengthen the provisions relating to its
independence and financial autonomy;
Prepare the court’s procedures manual;
Join INTOSAI ;
Provide the court with sufficient and
qualified staff and ensure their continuing
education.
Make known the CdC’s added value to the
public and administration
XXII
ANNEX 8 – Bank Portfolio in CAR as at 31 October 2016
Sector Project Title Approval Date Signature Effectiveness Net Commitments (UA
m) Disbursed Amounts
Disbursement Ratio (%)*
Closing Date
A. NATIONAL PROJECTS
Social Community Development and Vulnerable Group Support Project (PDCAGV)
22-July-09 24- July -09 24- July -09 8.00 3.73 46.66
30-Dec.-16
Support Programme for Reconstruction of Grassroots Communities Phase 1 (ADF)
24-June-15 16- July -15 16- July -15 9.55 0.18 1.87
31- Dec.-19
Support Programme for Reconstruction of Grassroots Communities Phase 1 (TSF)
24- June -15 16- July -15 16- July -15 5.00 0.00 0.00
31- Dec -19
Support Programme for Reconstruction of Grassroots Communities Phase 1 (RWSSI)
24- June -15 16- July -15 16- July -15 0.45 0.00 0.00
31- Dec.-19
Sub-Total
23.0 3.9 17.0
Multisector Economic and Financial Management Capacity Building Support Project (PARCGEF)
31-Jan.-11 25- Feb.-11 25- Feb.-11 4.00 2.7 67.96 30- Dec.-16
Economic and Financial Management Capacity Building Support Project (PARCGEF)
31-Jan.-11 25- Feb.-11 25- Feb.-11 0.50 0.24 48.01 30- Dec -16
Targeted Capacity Building Technical Support
25-Feb.-11 26- Feb.-11 27- Feb.-11 1.26 0.5 39.7 #N/A
Statistics and PRSP Implementation Technical Support
1-Nov.-12 31-May-13 31- May -13 1.35 0.85 63.40 19-June-16
Sub-Total Multisector
7.1 4.3 60.7
Water and Sanitation
First Water and Sanitation Sectoral Sub-Programme for Bangui and Four Prefectures (ADF loan)
24-Oct.-12 6- Dec.-12 17- May -13 1.04 0.72 69.53
31- Dec.-17
First Water and Sanitation Sectoral Sub-Programme for Bangui and Four Prefectures (FSF grant)
24-Oct.-12 6- Dec -12 6- Dec.-12 4.40 0.06 1.47
31- Dec.-17
First Water and Sanitation Sectoral Sub-Programme for Bangui and Four Prefectures (GEF grant)
3- Dec.-15 9-March-16 9- March -16 5.09 0.00 0.00
31- Dec -19
Sub-Total Water and Sanitation
10.53 0.79 7.48
SUB-TOTAL NATIONAL PROJECTS 40,64 9.01 22.18%
B. MULTINATIONAL PROJECTS
Energy Electrical Network Interconnection Project from the Boali Hydropower System Phase I
19-Sept.-12 17- Dec.-12 17- Dec.-12 29.73 1.74 5.85 31- Dec -17
Sub-Total Energy
29.7 1.74 5.85
Transport CEMAC Zone Transport Facilitation Programme (PFT CEMAC)
5-July-07 29- Feb.-08 29- Feb.-08 27.80 27.56
99.13 31- Dec.-15
Supplementary Grant Programme for Transport Facilitation on the Douala-Bangui/Douala-N’Djamena Corridors
2-July.-12 9-Aug.-12 9- Aug. -12 4.20 4.07 96.97 31- Dec.-15
Sub-Total Transport
32.0 31.6 98.8
Environment.
Programme for Rehabilitation and Strengthening of the Resilience of Socio- Economic Systems of the Lake Chad Basin, CAR
17- Dec.-14 14- May -15 14- May -15 2.19 0.00 0.00 30-Sept.-19
Biodiversity Conservation Programme – CAR component
22-July-13 11-Nov.-13 11-Nov.-13 2.50 0.40 16.03 31- Dec.-17
Sub-Total Environment
4.69 0.40 8.5
SUB-TOTAL MULTINATIONAL PROJECTS 66,42 33.77 50.84%
Total 107.06 42.78 39.96%
XXIII
ANNEX 9 – Administrative Map of CAR
This map has been provided by the staff of the African Development Bank (AfDB) Group
exclusively for the use of the readers of the report to which it is attached. The names used and
the borders shown do not imply on the part of the AfDB Group and its members any judgment
concerning the legal status of a territory nor any approval or acceptance of these borders.